Correlation Between KB Home and EBay
Can any of the company-specific risk be diversified away by investing in both KB Home and EBay 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 EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and eBay Inc, you can compare the effects of market volatilities on KB Home and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and EBay.
Diversification Opportunities for KB Home and EBay
Very weak diversification
The 3 months correlation between KBH and EBay is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of KB Home i.e., KB Home and EBay go up and down completely randomly.
Pair Corralation between KB Home and EBay
Assuming the 90 days trading horizon KB Home is expected to generate 1.07 times less return on investment than EBay. In addition to that, KB Home is 1.32 times more volatile than eBay Inc. It trades about 0.09 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.13 per unit of volatility. If you would invest 71,297 in eBay Inc on September 12, 2024 and sell it today you would earn a total of 57,403 from holding eBay Inc or generate 80.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. eBay Inc
Performance |
| Timeline |
| KB Home |
| eBay Inc |
KB Home and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and EBay
The main advantage of trading using opposite KB Home and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay'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 |
| EBay vs. Cognizant Technology Solutions | EBay vs. Grupo Sports World | EBay vs. KB Home | EBay vs. DXC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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