Correlation Between KLA Tencor and Kontoor Brands

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

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

Diversification Opportunities for KLA Tencor and Kontoor Brands

-0.62

Correlation Coefficient

KLA Tencor  Kontoor Brands

Excellent diversification

The 3 months correlation between KLA and Kontoor is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and KLA Tencor 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 KLA Tencor 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 KLA Tencor i.e., KLA Tencor and Kontoor Brands go up and down completely randomly.

Pair Corralation between KLA Tencor and Kontoor Brands

Given the investment horizon of 90 days KLA Tencor is expected to under-perform the Kontoor Brands. In addition to that, KLA Tencor is 1.18 times more volatile than Kontoor Brands. It trades about -0.06 of its total potential returns per unit of risk. Kontoor Brands is currently generating about 0.15 per unit of volatility. If you would invest  7,245  in Kontoor Brands on September 12, 2024 and sell it today you would earn a total of  1,598  from holding Kontoor Brands or generate 22.06% return on investment over 90 days.

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

KLA Tencor  vs.  Kontoor Brands

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kontoor Brands

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KLA Tencor and Kontoor Brands

The main advantage of trading using opposite KLA Tencor and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor 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 KLA Tencor 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.