Correlation Between Kirklands and Purple Innovation

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

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

Diversification Opportunities for Kirklands and Purple Innovation

0.57

Correlation Coefficient

Kirklands  Purple Innovation

Very weak diversification

The 3 months correlation between Kirklands and Purple is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kirklands and Purple Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purple Innovation and Kirklands 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 Kirklands are associated (or correlated) with Purple Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purple Innovation has no effect on the direction of Kirklands i.e., Kirklands and Purple Innovation go up and down completely randomly.

Pair Corralation between Kirklands and Purple Innovation

Given the investment horizon of 90 days Kirklands is expected to under-perform the Purple Innovation. But the stock apears to be less risky and, when comparing its historical volatility, Kirklands is 2.17 times less risky than Purple Innovation. The stock trades about -0.12 of its potential returns per unit of risk. The Purple Innovation is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Purple Innovation on December 29, 2024 and sell it today you would lose (8.00) from holding Purple Innovation or give up 9.64% of portfolio value over 90 days.

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

Kirklands  vs.  Purple Innovation

Kirklands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kirklands 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 quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Purple Innovation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Purple Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Purple Innovation is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kirklands and Purple Innovation

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

The idea behind Kirklands and Purple Innovation 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 Commodity Directory module to find actively traded commodities issued by global exchanges.