Correlation Between KB Home and Ambev SA
Can any of the company-specific risk be diversified away by investing in both KB Home and Ambev SA 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 KB Home and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Ambev SA, you can compare the effects of market volatilities on KB Home and Ambev SA 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 KB Home with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Ambev SA.
Diversification Opportunities for KB Home and Ambev SA
Good diversification
The 3 months correlation between KBH and Ambev is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and KB Home 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 KB Home are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of KB Home i.e., KB Home and Ambev SA go up and down completely randomly.
Pair Corralation between KB Home and Ambev SA
Assuming the 90 days trading horizon KB Home is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, KB Home is 1.24 times less risky than Ambev SA. The stock trades about -0.21 of its potential returns per unit of risk. The Ambev SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,399 in Ambev SA on September 12, 2024 and sell it today you would earn a total of 91.00 from holding Ambev SA or generate 2.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
KB Home vs. Ambev SA
Performance |
| Timeline |
| KB Home |
| Ambev SA |
KB Home and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Ambev SA
The main advantage of trading using opposite KB Home and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Ambev SA 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 Ambev SA will offset losses from the drop in Ambev SA's long position.| KB Home vs. Grupo Sports World | KB Home vs. Verizon Communications | KB Home vs. Grupo Carso SAB | KB Home vs. Costco Wholesale |
| Ambev SA vs. GMxico Transportes SAB | Ambev SA vs. Samsung Electronics Co | Ambev SA vs. Grupo Sports World | Ambev SA vs. KB Home |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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