Correlation Between Kontoor Brands and Nuvalent

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

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

Diversification Opportunities for Kontoor Brands and Nuvalent

-0.28

Correlation Coefficient

Kontoor Brands  Nuvalent

Very good diversification

The 3 months correlation between Kontoor and Nuvalent is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent 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 Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Nuvalent go up and down completely randomly.

Pair Corralation between Kontoor Brands and Nuvalent

Considering the 90-day investment horizon Kontoor Brands is expected to generate 0.45 times more return on investment than Nuvalent. However, Kontoor Brands is 2.24 times less risky than Nuvalent. It trades about -0.06 of its potential returns per unit of risk. Nuvalent is currently generating about -0.35 per unit of risk. If you would invest  8,928  in Kontoor Brands on October 12, 2024 and sell it today you would lose (130.00) from holding Kontoor Brands or give up 1.46% of portfolio value over 90 days.

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

Kontoor Brands  vs.  Nuvalent

Kontoor Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 5 (%) 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.

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kontoor Brands and Nuvalent

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

The idea behind Kontoor Brands and Nuvalent 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.