Correlation Between Capri Holdings and Kontoor Brands

Can any of the company-specific risk be diversified away by investing in both Capri Holdings and Kontoor Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capri Holdings and Kontoor Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capri Holdings and Kontoor Brands, you can compare the effects of market volatilities on Capri Holdings and Kontoor Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capri Holdings with a short position of Kontoor Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capri Holdings and Kontoor Brands.

Diversification Opportunities for Capri Holdings and Kontoor Brands

0.6

Correlation Coefficient

Capri Holdings  Kontoor Brands

Poor diversification

The 3 months correlation between Capri and Kontoor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Capri Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capri Holdings are associated (or correlated) with Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of Capri Holdings i.e., Capri Holdings and Kontoor Brands go up and down completely randomly.

Pair Corralation between Capri Holdings and Kontoor Brands

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Kontoor Brands. But the stock apears to be less risky and, when comparing its historical volatility, Capri Holdings is 1.17 times less risky than Kontoor Brands. The stock trades about -0.61 of its potential returns per unit of risk. The Kontoor Brands is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,803  in Kontoor Brands on January 26, 2024 and sell it today you would earn a total of  383.00  from holding Kontoor Brands or generate 6.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Capri Holdings  vs.  Kontoor Brands

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Kontoor Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kontoor Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capri Holdings and Kontoor Brands

The main advantage of trading using opposite Capri Holdings and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capri Holdings position performs unexpectedly, Kontoor Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kontoor Brands will offset losses from the drop in Kontoor Brands' long position.

The idea behind Capri Holdings and Kontoor Brands pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.