Correlation Between Kontoor Brands and Four Leaf

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

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

Diversification Opportunities for Kontoor Brands and Four Leaf

0.43

Correlation Coefficient

Kontoor Brands  Four Leaf

Very weak diversification

The 3 months correlation between Kontoor and Four is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Four Leaf Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Leaf Acquisition 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 Four Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Leaf Acquisition has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Four Leaf go up and down completely randomly.

Pair Corralation between Kontoor Brands and Four Leaf

Considering the 90-day investment horizon Kontoor Brands is expected to under-perform the Four Leaf. In addition to that, Kontoor Brands is 70.44 times more volatile than Four Leaf Acquisition. It trades about -0.2 of its total potential returns per unit of risk. Four Leaf Acquisition is currently generating about 0.22 per unit of volatility. If you would invest  1,103  in Four Leaf Acquisition on September 27, 2024 and sell it today you would earn a total of  1.00  from holding Four Leaf Acquisition or generate 0.09% 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.  Four Leaf Acquisition

Kontoor Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kontoor Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Four Leaf Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Four Leaf is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kontoor Brands and Four Leaf

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

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