Correlation Between Kontoor Brands and Burlington Stores

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

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

Diversification Opportunities for Kontoor Brands and Burlington Stores

0.77

Correlation Coefficient

Kontoor Brands  Burlington Stores

Poor diversification

The 3 months correlation between Kontoor and Burlington is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Burlington Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burlington Stores and Kontoor 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 Kontoor Brands are associated (or correlated) with Burlington Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burlington Stores has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Burlington Stores go up and down completely randomly.

Pair Corralation between Kontoor Brands and Burlington Stores

Considering the 90-day investment horizon Kontoor Brands is expected to under-perform the Burlington Stores. In addition to that, Kontoor Brands is 1.06 times more volatile than Burlington Stores. It trades about -0.14 of its total potential returns per unit of risk. Burlington Stores is currently generating about -0.09 per unit of volatility. If you would invest  28,480  in Burlington Stores on December 30, 2024 and sell it today you would lose (4,713) from holding Burlington Stores or give up 16.55% of portfolio value over 90 days.

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

Kontoor Brands  vs.  Burlington Stores

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.

Burlington Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burlington Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Kontoor Brands and Burlington Stores

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

The idea behind Kontoor Brands and Burlington Stores 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.