Correlation Between Target and Kohls Corp

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

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

Diversification Opportunities for Target and Kohls Corp

-0.13

Correlation Coefficient

Target  Kohls Corp

Good diversification

The 3 months correlation between Target and Kohls is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Target and Kohls Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohls Corp and Target 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 Target are associated (or correlated) with Kohls Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohls Corp has no effect on the direction of Target i.e., Target and Kohls Corp go up and down completely randomly.

Pair Corralation between Target and Kohls Corp

Considering the 90-day investment horizon Target is expected to under-perform the Kohls Corp. But the stock apears to be less risky and, when comparing its historical volatility, Target is 2.6 times less risky than Kohls Corp. The stock trades about -0.39 of its potential returns per unit of risk. The Kohls Corp is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,691  in Kohls Corp on February 3, 2024 and sell it today you would lose (226.00) from holding Kohls Corp or give up 8.4% of portfolio value over 90 days.

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

Target  vs.  Kohls Corp

Target

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kohls Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohls Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kohls Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Target and Kohls Corp

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

The idea behind Target and Kohls Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.