Correlation Between Kontoor Brands and Boston Beer

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

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

Diversification Opportunities for Kontoor Brands and Boston Beer

0.8

Correlation Coefficient

Kontoor Brands  Boston Beer

Very poor diversification

The 3 months correlation between Kontoor and Boston is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and Boston Beer go up and down completely randomly.

Pair Corralation between Kontoor Brands and Boston Beer

Considering the 90-day investment horizon Kontoor Brands is expected to generate 1.44 times more return on investment than Boston Beer. However, Kontoor Brands is 1.44 times more volatile than Boston Beer. It trades about 0.17 of its potential returns per unit of risk. Boston Beer is currently generating about 0.13 per unit of risk. If you would invest  7,287  in Kontoor Brands on September 2, 2024 and sell it today you would earn a total of  1,891  from holding Kontoor Brands or generate 25.95% return on investment over 90 days.

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

Kontoor Brands  vs.  Boston Beer

Kontoor Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Boston Beer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kontoor Brands and Boston Beer

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

The idea behind Kontoor Brands and Boston Beer 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.