Correlation Between Kontoor Brands and Capri Holdings

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

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

Diversification Opportunities for Kontoor Brands and Capri Holdings

0.56

Correlation Coefficient

Kontoor Brands  Capri Holdings

Very weak diversification

The 3 months correlation between Kontoor and Capri is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Capri Holdings go up and down completely randomly.

Pair Corralation between Kontoor Brands and Capri Holdings

Considering the 90-day investment horizon Kontoor Brands is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Kontoor Brands is 1.21 times less risky than Capri Holdings. The stock trades about -0.14 of its potential returns per unit of risk. The Capri Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,052  in Capri Holdings on December 28, 2024 and sell it today you would earn a total of  7.00  from holding Capri Holdings or generate 0.34% return on investment over 90 days.

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

Kontoor Brands  vs.  Capri Holdings

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.

Capri Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Capri Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Kontoor Brands and Capri Holdings

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

The idea behind Kontoor Brands and Capri Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.