Correlation Between KB Home and Glencore Plc
Can any of the company-specific risk be diversified away by investing in both KB Home and Glencore Plc 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 Glencore Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Glencore plc, you can compare the effects of market volatilities on KB Home and Glencore Plc 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 Glencore Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Glencore Plc.
Diversification Opportunities for KB Home and Glencore Plc
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between KBH and Glencore is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Glencore plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore plc 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 Glencore Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore plc has no effect on the direction of KB Home i.e., KB Home and Glencore Plc go up and down completely randomly.
Pair Corralation between KB Home and Glencore Plc
Assuming the 90 days trading horizon KB Home is expected to generate 23.27 times more return on investment than Glencore Plc. However, KB Home is 23.27 times more volatile than Glencore plc. It trades about 0.12 of its potential returns per unit of risk. Glencore plc is currently generating about 0.09 per unit of risk. If you would invest 104,810 in KB Home on September 5, 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 Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Glencore plc
Performance |
| Timeline |
| KB Home |
| Glencore plc |
KB Home and Glencore Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Glencore Plc
The main advantage of trading using opposite KB Home and Glencore Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Glencore Plc 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 Glencore Plc will offset losses from the drop in Glencore Plc's long position.The idea behind KB Home and Glencore plc 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.| Glencore Plc vs. Genworth Financial | Glencore Plc vs. Capital One Financial | Glencore Plc vs. Applied Materials | Glencore Plc vs. UnitedHealth Group Incorporated |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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