Correlation Between Q2 Holdings and Kontoor Brands

Can any of the company-specific risk be diversified away by investing in both Q2 Holdings 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 Q2 Holdings and Kontoor Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Holdings and Kontoor Brands, you can compare the effects of market volatilities on Q2 Holdings 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 Q2 Holdings with a short position of Kontoor Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and Kontoor Brands.

Diversification Opportunities for Q2 Holdings and Kontoor Brands

0.89

Correlation Coefficient

Q2 Holdings  Kontoor Brands

Very poor diversification

The 3 months correlation between QTWO and Kontoor is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings i.e., Q2 Holdings and Kontoor Brands go up and down completely randomly.

Pair Corralation between Q2 Holdings and Kontoor Brands

Given the investment horizon of 90 days Q2 Holdings is expected to generate 1.24 times more return on investment than Kontoor Brands. However, Q2 Holdings is 1.24 times more volatile than Kontoor Brands. It trades about 0.11 of its potential returns per unit of risk. Kontoor Brands is currently generating about 0.08 per unit of risk. If you would invest  2,852  in Q2 Holdings on September 27, 2024 and sell it today you would earn a total of  7,624  from holding Q2 Holdings or generate 267.32% return on investment over 90 days.

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

Q2 Holdings  vs.  Kontoor Brands

Q2 Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Kontoor Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kontoor Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Q2 Holdings and Kontoor Brands

The main advantage of trading using opposite Q2 Holdings and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings 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 Q2 Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.