Correlation Between Kirklands and Winmark

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

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

Diversification Opportunities for Kirklands and Winmark

-0.49

Correlation Coefficient

Kirklands  Winmark

Very good diversification

The 3 months correlation between Kirklands and Winmark is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Kirklands and Winmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winmark and Kirklands 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 Kirklands are associated (or correlated) with Winmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winmark has no effect on the direction of Kirklands i.e., Kirklands and Winmark go up and down completely randomly.

Pair Corralation between Kirklands and Winmark

Given the investment horizon of 90 days Kirklands is expected to under-perform the Winmark. In addition to that, Kirklands is 1.99 times more volatile than Winmark. It trades about -0.02 of its total potential returns per unit of risk. Winmark is currently generating about 0.12 per unit of volatility. If you would invest  35,448  in Winmark on September 15, 2024 and sell it today you would earn a total of  5,315  from holding Winmark or generate 14.99% return on investment over 90 days.

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

Kirklands  vs.  Winmark

Kirklands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kirklands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kirklands is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Winmark

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Winmark are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Winmark sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kirklands and Winmark

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

The idea behind Kirklands and Winmark 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.