Correlation Between Kontoor Brands and Civitas Resources

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

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

Diversification Opportunities for Kontoor Brands and Civitas Resources

-0.36

Correlation Coefficient

Kontoor Brands  Civitas Resources

Very good diversification

The 3 months correlation between Kontoor and Civitas is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources 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 Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Civitas Resources go up and down completely randomly.

Pair Corralation between Kontoor Brands and Civitas Resources

Considering the 90-day investment horizon Kontoor Brands is expected to under-perform the Civitas Resources. But the stock apears to be less risky and, when comparing its historical volatility, Kontoor Brands is 27.23 times less risky than Civitas Resources. The stock trades about -0.01 of its potential returns per unit of risk. The Civitas Resources is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Civitas Resources on October 20, 2024 and sell it today you would earn a total of  23.00  from holding Civitas Resources or generate 135.29% return on investment over 90 days.

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

Kontoor Brands  vs.  Civitas Resources

Kontoor Brands

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Kontoor Brands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Civitas Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Civitas Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kontoor Brands and Civitas Resources

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

The idea behind Kontoor Brands and Civitas Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.