Correlation Between VF and Kontoor Brands

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

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

Diversification Opportunities for VF and Kontoor Brands

0.28

Correlation Coefficient

VF  Kontoor Brands

Modest diversification

The 3 months correlation between VF and Kontoor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding VF Corp. and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and VF 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 VF Corporation 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 VF i.e., VF and Kontoor Brands go up and down completely randomly.

Pair Corralation between VF and Kontoor Brands

Considering the 90-day investment horizon VF Corporation is expected to under-perform the Kontoor Brands. In addition to that, VF is 1.87 times more volatile than Kontoor Brands. It trades about -0.05 of its total potential returns per unit of risk. Kontoor Brands is currently generating about 0.1 per unit of volatility. If you would invest  4,611  in Kontoor Brands on February 7, 2024 and sell it today you would earn a total of  1,954  from holding Kontoor Brands or generate 42.38% return on investment over 90 days.

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

VF Corp.  vs.  Kontoor Brands

VF Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VF Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kontoor Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VF and Kontoor Brands

The main advantage of trading using opposite VF and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VF 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 VF Corporation 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.