Correlation Between KB Home and Grupo Carso

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Can any of the company-specific risk be diversified away by investing in both KB Home and Grupo Carso 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 Grupo Carso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Grupo Carso SAB, you can compare the effects of market volatilities on KB Home and Grupo Carso 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 Grupo Carso. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Grupo Carso.

Diversification Opportunities for KB Home and Grupo Carso

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between KBH and Grupo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Grupo Carso SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Carso SAB 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 Grupo Carso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Carso SAB has no effect on the direction of KB Home i.e., KB Home and Grupo Carso go up and down completely randomly.

Pair Corralation between KB Home and Grupo Carso

Assuming the 90 days trading horizon KB Home is expected to generate 1.42 times more return on investment than Grupo Carso. However, KB Home is 1.42 times more volatile than Grupo Carso SAB. It trades about 0.12 of its potential returns per unit of risk. Grupo Carso SAB is currently generating about -0.03 per unit of risk. If you would invest  104,810  in KB Home on September 12, 2024 and sell it today you would earn a total of  51,890  from holding KB Home or generate 49.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

KB Home  vs.  Grupo Carso SAB

 Performance 
       Timeline  
KB Home 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in KB Home are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, KB Home showed solid returns over the last few months and may actually be approaching a breakup point.
Grupo Carso SAB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Carso is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KB Home and Grupo Carso Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KB Home and Grupo Carso

The main advantage of trading using opposite KB Home and Grupo Carso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Grupo Carso 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 Grupo Carso will offset losses from the drop in Grupo Carso's long position.
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The idea behind KB Home and Grupo Carso SAB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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