Correlation Between Kontoor Brands and Victorias Secret

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

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

Diversification Opportunities for Kontoor Brands and Victorias Secret

0.56

Correlation Coefficient

Kontoor Brands  Victorias Secret

Very weak diversification

The 3 months correlation between Kontoor and Victorias is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Victorias Secret Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victorias Secret and Kontoor Brands 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 Kontoor Brands are associated (or correlated) with Victorias Secret. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victorias Secret has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Victorias Secret go up and down completely randomly.

Pair Corralation between Kontoor Brands and Victorias Secret

Considering the 90-day investment horizon Kontoor Brands is expected to generate 0.62 times more return on investment than Victorias Secret. However, Kontoor Brands is 1.61 times less risky than Victorias Secret. It trades about 0.08 of its potential returns per unit of risk. Victorias Secret Co is currently generating about -0.14 per unit of risk. If you would invest  6,025  in Kontoor Brands on January 28, 2024 and sell it today you would earn a total of  195.00  from holding Kontoor Brands or generate 3.24% return on investment over 90 days.

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

Kontoor Brands  vs.  Victorias Secret Co

Kontoor Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 1 (%) 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.

Victorias Secret

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victorias Secret Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Kontoor Brands and Victorias Secret

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

The idea behind Kontoor Brands and Victorias Secret Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.