Correlation Between Escalade Incorporated and Kontoor Brands

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

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

Diversification Opportunities for Escalade Incorporated and Kontoor Brands

0.07

Correlation Coefficient

Escalade Incorporated  Kontoor Brands

Significant diversification

The 3 months correlation between Escalade and Kontoor is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Escalade Incorporated 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 Escalade Incorporated 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 Escalade Incorporated i.e., Escalade Incorporated and Kontoor Brands go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Kontoor Brands

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 0.84 times more return on investment than Kontoor Brands. However, Escalade Incorporated is 1.19 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 -0.14 per unit of risk. If you would invest  1,404  in Escalade Incorporated on December 29, 2024 and sell it today you would earn a total of  126.00  from holding Escalade Incorporated or generate 8.97% return on investment over 90 days.

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

Escalade Incorporated  vs.  Kontoor Brands

Escalade Incorporated

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated 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 Escalade Incorporated and Kontoor Brands

The main advantage of trading using opposite Escalade Incorporated and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Escalade Incorporated 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 Escalade Incorporated 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.