Correlation Between KB Home and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both KB Home and Costco Wholesale 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 Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Costco Wholesale, you can compare the effects of market volatilities on KB Home and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Costco Wholesale.
Diversification Opportunities for KB Home and Costco Wholesale
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between KBH and Costco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of KB Home i.e., KB Home and Costco Wholesale go up and down completely randomly.
Pair Corralation between KB Home and Costco Wholesale
Assuming the 90 days trading horizon KB Home is expected to generate 4.02 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, KB Home is 4.63 times less risky than Costco Wholesale. It trades about 0.22 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,892,701 in Costco Wholesale on November 4, 2024 and sell it today you would earn a total of 135,599 from holding Costco Wholesale or generate 7.16% 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. Costco Wholesale
Performance |
| Timeline |
| KB Home |
| Costco Wholesale |
KB Home and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Costco Wholesale
The main advantage of trading using opposite KB Home and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| KB Home vs. GMxico Transportes SAB | KB Home vs. Grupo Carso SAB | KB Home vs. Monster Beverage Corp | KB Home vs. FIBRA Storage |
| Costco Wholesale vs. KB Home | Costco Wholesale vs. Southern Copper | Costco Wholesale vs. Lloyds Banking Group | Costco Wholesale vs. Grupo Hotelero Santa |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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