Correlation Between KB Home and Amgen
Can any of the company-specific risk be diversified away by investing in both KB Home and Amgen 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 Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Amgen Inc, you can compare the effects of market volatilities on KB Home and Amgen 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 Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Amgen.
Diversification Opportunities for KB Home and Amgen
Very good diversification
The 3 months correlation between KBH and Amgen is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of KB Home i.e., KB Home and Amgen go up and down completely randomly.
Pair Corralation between KB Home and Amgen
Assuming the 90 days trading horizon KB Home is expected to generate 0.5 times more return on investment than Amgen. However, KB Home is 2.01 times less risky than Amgen. It trades about -0.21 of its potential returns per unit of risk. Amgen Inc is currently generating about -0.11 per unit of risk. If you would invest 168,486 in KB Home on August 31, 2024 and sell it today you would lose (11,786) from holding KB Home or give up 7.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Amgen Inc
Performance |
| Timeline |
| KB Home |
| Amgen Inc |
KB Home and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Amgen
The main advantage of trading using opposite KB Home and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.| KB Home vs. New Oriental Education | KB Home vs. FibraHotel | KB Home vs. Genworth Financial | KB Home vs. Grupo Hotelero Santa |
| Amgen vs. Capital One Financial | Amgen vs. Ameriprise Financial | Amgen vs. KB Home | Amgen vs. Micron Technology |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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