Correlation Between Kohls Corp and Dillards

Can any of the company-specific risk be diversified away by investing in both Kohls Corp and Dillards 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 Kohls Corp and Dillards into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kohls Corp and Dillards, you can compare the effects of market volatilities on Kohls Corp and Dillards 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 Kohls Corp with a short position of Dillards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kohls Corp and Dillards.

Diversification Opportunities for Kohls Corp and Dillards

0.37

Correlation Coefficient

Kohls Corp  Dillards

Weak diversification

The 3 months correlation between Kohls and Dillards is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kohls Corp and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards and Kohls Corp 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 Kohls Corp are associated (or correlated) with Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Kohls Corp i.e., Kohls Corp and Dillards go up and down completely randomly.

Pair Corralation between Kohls Corp and Dillards

Considering the 90-day investment horizon Kohls Corp is expected to under-perform the Dillards. In addition to that, Kohls Corp is 1.29 times more volatile than Dillards. It trades about -0.16 of its total potential returns per unit of risk. Dillards is currently generating about -0.14 per unit of volatility. If you would invest  43,941  in Dillards on January 20, 2024 and sell it today you would lose (3,760) from holding Dillards or give up 8.56% of portfolio value over 90 days.

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

Kohls Corp  vs.  Dillards

Kohls Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohls Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Dillards

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Dillards is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kohls Corp and Dillards

The main advantage of trading using opposite Kohls Corp and Dillards positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kohls Corp position performs unexpectedly, Dillards 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 Dillards will offset losses from the drop in Dillards' long position.

The idea behind Kohls Corp and Dillards 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.