Correlation Between Digital Brands and Kontoor Brands

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

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

Diversification Opportunities for Digital Brands and Kontoor Brands

0.0

Correlation Coefficient

Digital Brands  Kontoor Brands

Pay attention - limited upside

The 3 months correlation between Digital and Kontoor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brands Group and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Digital 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 Digital Brands Group 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 Digital Brands i.e., Digital Brands and Kontoor Brands go up and down completely randomly.

Pair Corralation between Digital Brands and Kontoor Brands

If you would invest (100.00) in Digital Brands Group on December 5, 2024 and sell it today you would earn a total of  100.00  from holding Digital Brands Group or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Digital Brands Group  vs.  Kontoor Brands

Digital Brands Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Brands Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Digital Brands is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Kontoor Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kontoor Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Digital Brands and Kontoor Brands

The main advantage of trading using opposite Digital Brands and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Brands 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 Digital Brands Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.