Correlation Between Nuvalent and Kontoor Brands

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

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

Diversification Opportunities for Nuvalent and Kontoor Brands

0.74

Correlation Coefficient

Nuvalent  Kontoor Brands

Poor diversification

The 3 months correlation between Nuvalent and Kontoor is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Nuvalent 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 Nuvalent 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 Nuvalent i.e., Nuvalent and Kontoor Brands go up and down completely randomly.

Pair Corralation between Nuvalent and Kontoor Brands

Given the investment horizon of 90 days Nuvalent is expected to generate 0.92 times more return on investment than Kontoor Brands. However, Nuvalent is 1.09 times less risky than Kontoor Brands. It trades about -0.04 of its potential returns per unit of risk. Kontoor Brands is currently generating about -0.17 per unit of risk. If you would invest  8,422  in Nuvalent on December 20, 2024 and sell it today you would lose (665.00) from holding Nuvalent or give up 7.9% of portfolio value over 90 days.

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

Nuvalent  vs.  Kontoor Brands

Nuvalent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 Nuvalent and Kontoor Brands

The main advantage of trading using opposite Nuvalent and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvalent 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 Nuvalent 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.