Correlation Between Definitive Healthcare and Kontoor Brands

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

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

Diversification Opportunities for Definitive Healthcare and Kontoor Brands

0.47

Correlation Coefficient

Definitive Healthcare  Kontoor Brands

Very weak diversification

The 3 months correlation between Definitive and Kontoor is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Definitive Healthcare 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 Definitive Healthcare Corp 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 Definitive Healthcare i.e., Definitive Healthcare and Kontoor Brands go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Kontoor Brands

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the Kontoor Brands. In addition to that, Definitive Healthcare is 1.6 times more volatile than Kontoor Brands. It trades about -0.03 of its total potential returns per unit of risk. Kontoor Brands is currently generating about 0.08 per unit of volatility. If you would invest  4,014  in Kontoor Brands on September 27, 2024 and sell it today you would earn a total of  4,606  from holding Kontoor Brands or generate 114.75% return on investment over 90 days.

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

Definitive Healthcare Corp  vs.  Kontoor Brands

Definitive Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kontoor Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kontoor Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Definitive Healthcare and Kontoor Brands

The main advantage of trading using opposite Definitive Healthcare and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definitive Healthcare 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 Definitive Healthcare Corp 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.