Correlation Between Kontoor Brands and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Kontoor Brands and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kontoor Brands and Iridium Communications, you can compare the effects of market volatilities on Kontoor Brands and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kontoor Brands and Iridium Communications.
Diversification Opportunities for Kontoor Brands and Iridium Communications
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Kontoor and Iridium is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Iridium Communications go up and down completely randomly.
Pair Corralation between Kontoor Brands and Iridium Communications
Considering the 90-day investment horizon Kontoor Brands is expected to generate 0.79 times more return on investment than Iridium Communications. However, Kontoor Brands is 1.26 times less risky than Iridium Communications. It trades about 0.1 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.04 per unit of risk. If you would invest 6,749 in Kontoor Brands on October 13, 2024 and sell it today you would earn a total of 1,880 from holding Kontoor Brands or generate 27.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Kontoor Brands vs. Iridium Communications
Performance |
Timeline |
Kontoor Brands |
Iridium Communications |
Kontoor Brands and Iridium Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kontoor Brands and Iridium Communications
The main advantage of trading using opposite Kontoor Brands and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kontoor Brands position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.Kontoor Brands vs. Vince Holding Corp | Kontoor Brands vs. Ermenegildo Zegna NV | Kontoor Brands vs. Columbia Sportswear | Kontoor Brands vs. Gildan Activewear |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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