Correlation Between LQR House and Kontoor Brands

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

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

Diversification Opportunities for LQR House and Kontoor Brands

0.56

Correlation Coefficient

LQR House  Kontoor Brands

Very weak diversification

The 3 months correlation between LQR and Kontoor is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding LQR House Common and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and LQR House 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 LQR House Common are associated (or correlated) with Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of LQR House i.e., LQR House and Kontoor Brands go up and down completely randomly.

Pair Corralation between LQR House and Kontoor Brands

Considering the 90-day investment horizon LQR House Common is expected to generate 12.04 times more return on investment than Kontoor Brands. However, LQR House is 12.04 times more volatile than Kontoor Brands. It trades about 0.14 of its potential returns per unit of risk. Kontoor Brands is currently generating about -0.02 per unit of risk. If you would invest  117.00  in LQR House Common on October 11, 2024 and sell it today you would earn a total of  17.00  from holding LQR House Common or generate 14.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.43%
Values	Daily Returns

LQR House Common  vs.  Kontoor Brands

LQR House Common

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days LQR House Common has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, LQR House reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with LQR House and Kontoor Brands

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

The idea behind LQR House Common and Kontoor Brands 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.