Correlation Between KB Home and JetBlue Airways
Can any of the company-specific risk be diversified away by investing in both KB Home and JetBlue Airways 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 JetBlue Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and JetBlue Airways, you can compare the effects of market volatilities on KB Home and JetBlue Airways 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 JetBlue Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and JetBlue Airways.
Diversification Opportunities for KB Home and JetBlue Airways
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KBH and JetBlue is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and JetBlue Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways has no effect on the direction of KB Home i.e., KB Home and JetBlue Airways go up and down completely randomly.
Pair Corralation between KB Home and JetBlue Airways
Assuming the 90 days trading horizon KB Home is expected to generate 0.51 times more return on investment than JetBlue Airways. However, KB Home is 1.97 times less risky than JetBlue Airways. It trades about 0.11 of its potential returns per unit of risk. JetBlue Airways is currently generating about 0.02 per unit of risk. If you would invest 75,468 in KB Home on September 2, 2024 and sell it today you would earn a total of 81,232 from holding KB Home or generate 107.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. JetBlue Airways
Performance |
| Timeline |
| KB Home |
| JetBlue Airways |
KB Home and JetBlue Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and JetBlue Airways
The main advantage of trading using opposite KB Home and JetBlue Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, JetBlue Airways 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 JetBlue Airways will offset losses from the drop in JetBlue Airways' long position.The idea behind KB Home and JetBlue Airways 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.| JetBlue Airways vs. Verizon Communications | JetBlue Airways vs. Micron Technology | JetBlue Airways vs. Southern Copper | JetBlue Airways 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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