Correlation Between Mohawk Industries and Kirklands

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

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

Diversification Opportunities for Mohawk Industries and Kirklands

0.52

Correlation Coefficient

Mohawk Industries  Kirklands

Very weak diversification

The 3 months correlation between Mohawk and Kirklands is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mohawk Industries and Kirklands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirklands and Mohawk Industries 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 Mohawk Industries are associated (or correlated) with Kirklands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirklands has no effect on the direction of Mohawk Industries i.e., Mohawk Industries and Kirklands go up and down completely randomly.

Pair Corralation between Mohawk Industries and Kirklands

Considering the 90-day investment horizon Mohawk Industries is expected to generate 0.63 times more return on investment than Kirklands. However, Mohawk Industries is 1.6 times less risky than Kirklands. It trades about -0.03 of its potential returns per unit of risk. Kirklands is currently generating about -0.12 per unit of risk. If you would invest  11,854  in Mohawk Industries on December 29, 2024 and sell it today you would lose (480.00) from holding Mohawk Industries or give up 4.05% of portfolio value over 90 days.

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

Mohawk Industries  vs.  Kirklands

Mohawk Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mohawk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Mohawk Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Kirklands

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mohawk Industries and Kirklands

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

The idea behind Mohawk Industries and Kirklands 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.