Correlation Between Delek Drilling and Kontoor Brands

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

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

Diversification Opportunities for Delek Drilling and Kontoor Brands

-0.46

Correlation Coefficient

Delek Drilling  Kontoor Brands

Very good diversification

The 3 months correlation between Delek and Kontoor is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Delek Drilling and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Delek Drilling 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 Delek Drilling 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 Delek Drilling i.e., Delek Drilling and Kontoor Brands go up and down completely randomly.

Pair Corralation between Delek Drilling and Kontoor Brands

Assuming the 90 days horizon Delek Drilling is expected to generate 0.73 times more return on investment than Kontoor Brands. However, Delek Drilling is 1.37 times less risky than Kontoor Brands. It trades about 0.07 of its potential returns per unit of risk. Kontoor Brands is currently generating about -0.15 per unit of risk. If you would invest  327.00  in Delek Drilling on December 28, 2024 and sell it today you would earn a total of  25.00  from holding Delek Drilling or generate 7.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Delek Drilling   vs.  Kontoor Brands

Delek Drilling

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Delek Drilling may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Delek Drilling and Kontoor Brands

The main advantage of trading using opposite Delek Drilling and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Drilling 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 Delek Drilling 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.