Correlation Between Revolve Group and Kontoor Brands

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

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

Diversification Opportunities for Revolve Group and Kontoor Brands

0.9

Correlation Coefficient

Revolve Group  Kontoor Brands

Almost no diversification

The 3 months correlation between Revolve and Kontoor is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Revolve Group LLC and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands and Revolve Group 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 Revolve Group LLC 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 Revolve Group i.e., Revolve Group and Kontoor Brands go up and down completely randomly.

Pair Corralation between Revolve Group and Kontoor Brands

Given the investment horizon of 90 days Revolve Group LLC is expected to generate 1.9 times more return on investment than Kontoor Brands. However, Revolve Group is 1.9 times more volatile than Kontoor Brands. It trades about 0.17 of its potential returns per unit of risk. Kontoor Brands is currently generating about 0.11 per unit of risk. If you would invest  2,450  in Revolve Group LLC on September 17, 2024 and sell it today you would earn a total of  1,259  from holding Revolve Group LLC or generate 51.39% return on investment over 90 days.

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

Revolve Group LLC  vs.  Kontoor Brands

Revolve Group LLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Revolve Group LLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Revolve Group showed solid returns over the last few months and may actually be approaching a breakup point.

Kontoor Brands

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Revolve Group and Kontoor Brands

The main advantage of trading using opposite Revolve Group and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolve Group 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 Revolve Group LLC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.