Correlation Between Kontoor Brands and Infosys

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

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

Diversification Opportunities for Kontoor Brands and Infosys

0.23

Correlation Coefficient

Kontoor Brands  Infosys

Modest diversification

The 3 months correlation between Kontoor and Infosys is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Infosys go up and down completely randomly.

Pair Corralation between Kontoor Brands and Infosys

Considering the 90-day investment horizon Kontoor Brands is expected to generate 1.56 times more return on investment than Infosys. However, Kontoor Brands is 1.56 times more volatile than Infosys Ltd ADR. It trades about 0.08 of its potential returns per unit of risk. Infosys Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest  4,014  in Kontoor Brands on September 27, 2024 and sell it today you would earn a total of  4,606  from holding Kontoor Brands or generate 114.75% return on investment over 90 days.

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

Kontoor Brands  vs.  Infosys Ltd ADR

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.

Infosys Ltd ADR

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Infosys is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kontoor Brands and Infosys

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

The idea behind Kontoor Brands and Infosys Ltd ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.