Correlation Between KB Home and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both KB Home and Berkshire Hathaway 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 Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Berkshire Hathaway, you can compare the effects of market volatilities on KB Home and Berkshire Hathaway 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 Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Berkshire Hathaway.
Diversification Opportunities for KB Home and Berkshire Hathaway
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between KBH and Berkshire is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway 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 Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of KB Home i.e., KB Home and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between KB Home and Berkshire Hathaway
Assuming the 90 days trading horizon KB Home is expected to under-perform the Berkshire Hathaway. But the stock apears to be less risky and, when comparing its historical volatility, KB Home is 1.19 times less risky than Berkshire Hathaway. The stock trades about -0.21 of its potential returns per unit of risk. The Berkshire Hathaway is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 915,002 in Berkshire Hathaway on August 27, 2024 and sell it today you would earn a total of 56,498 from holding Berkshire Hathaway or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Berkshire Hathaway
Performance |
| Timeline |
| KB Home |
| Berkshire Hathaway |
KB Home and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Berkshire Hathaway
The main advantage of trading using opposite KB Home and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Berkshire Hathaway 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 Berkshire Hathaway will offset losses from the drop in Berkshire Hathaway's long position.| KB Home vs. Ameriprise Financial | KB Home vs. Genworth Financial | KB Home vs. CVS Health | KB Home vs. Samsung Electronics Co |
| Berkshire Hathaway vs. Verizon Communications | Berkshire Hathaway vs. KB Home | Berkshire Hathaway vs. United States Steel | Berkshire Hathaway vs. Burlington Stores |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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