Correlation Between FAST RETAIL and KB HOME

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Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and KB HOME 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 FAST RETAIL and KB HOME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAST RETAIL ADR and KB HOME, you can compare the effects of market volatilities on FAST RETAIL and KB HOME 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 FAST RETAIL with a short position of KB HOME. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and KB HOME.

Diversification Opportunities for FAST RETAIL and KB HOME

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between FAST and KBH is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and FAST RETAIL 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 FAST RETAIL ADR are associated (or correlated) with KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and KB HOME go up and down completely randomly.

Pair Corralation between FAST RETAIL and KB HOME

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 1.35 times more return on investment than KB HOME. However, FAST RETAIL is 1.35 times more volatile than KB HOME. It trades about -0.23 of its potential returns per unit of risk. KB HOME is currently generating about -0.31 per unit of risk. If you would invest  3,200  in FAST RETAIL ADR on October 16, 2024 and sell it today you would lose (260.00) from holding FAST RETAIL ADR or give up 8.12% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FAST RETAIL ADR  vs.  KB HOME

 Performance 
       Timeline  
FAST RETAIL ADR 

Risk-Adjusted Performance

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Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
KB HOME 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days KB HOME 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

FAST RETAIL and KB HOME Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FAST RETAIL and KB HOME

The main advantage of trading using opposite FAST RETAIL and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, KB HOME 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 KB HOME will offset losses from the drop in KB HOME's long position.
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The idea behind FAST RETAIL ADR and KB HOME 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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