Correlation Between Margo Caribe and Kontoor Brands

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

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

Diversification Opportunities for Margo Caribe and Kontoor Brands

-0.61

Correlation Coefficient

Margo Caribe  Kontoor Brands

Excellent diversification

The 3 months correlation between Margo and Kontoor is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Margo Caribe and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Margo Caribe 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 Margo Caribe 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 Margo Caribe i.e., Margo Caribe and Kontoor Brands go up and down completely randomly.

Pair Corralation between Margo Caribe and Kontoor Brands

Given the investment horizon of 90 days Margo Caribe is expected to generate 1.9 times more return on investment than Kontoor Brands. However, Margo Caribe is 1.9 times more volatile than Kontoor Brands. It trades about 0.18 of its potential returns per unit of risk. Kontoor Brands is currently generating about -0.17 per unit of risk. If you would invest  465.00  in Margo Caribe on December 19, 2024 and sell it today you would earn a total of  310.00  from holding Margo Caribe or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Margo Caribe  vs.  Kontoor Brands

Margo Caribe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Margo Caribe are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Margo Caribe displayed solid returns over the last few months and may actually be approaching a breakup point.

Kontoor Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kontoor Brands 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Margo Caribe and Kontoor Brands

The main advantage of trading using opposite Margo Caribe and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Margo Caribe 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 Margo Caribe 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.