Correlation Between Jerash Holdings and Kontoor Brands

Can any of the company-specific risk be diversified away by investing in both Jerash 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 Jerash 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 Jerash Holdings and Kontoor Brands, you can compare the effects of market volatilities on Jerash 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 Jerash Holdings with a short position of Kontoor Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jerash Holdings and Kontoor Brands.

Diversification Opportunities for Jerash Holdings and Kontoor Brands

0.76

Correlation Coefficient

Jerash Holdings  Kontoor Brands

Poor diversification

The 3 months correlation between Jerash and Kontoor is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Jerash Holdings and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Jerash 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 Jerash 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 Jerash Holdings i.e., Jerash Holdings and Kontoor Brands go up and down completely randomly.

Pair Corralation between Jerash Holdings and Kontoor Brands

Given the investment horizon of 90 days Jerash Holdings is expected to generate 1.31 times less return on investment than Kontoor Brands. But when comparing it to its historical volatility, Jerash Holdings is 1.28 times less risky than Kontoor Brands. It trades about 0.17 of its potential returns per unit of risk. Kontoor Brands is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,287  in Kontoor Brands on September 2, 2024 and sell it today you would earn a total of  1,891  from holding Kontoor Brands or generate 25.95% return on investment over 90 days.

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

Jerash Holdings  vs.  Kontoor Brands

Jerash Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jerash Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Jerash Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Kontoor Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jerash Holdings and Kontoor Brands

The main advantage of trading using opposite Jerash Holdings and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jerash 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 Jerash 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.