Correlation Between KB Home and McDonalds
Can any of the company-specific risk be diversified away by investing in both KB Home and McDonalds 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 McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and McDonalds, you can compare the effects of market volatilities on KB Home and McDonalds 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 McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and McDonalds.
Diversification Opportunities for KB Home and McDonalds
Poor diversification
The 3 months correlation between KBH and McDonalds is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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 McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of KB Home i.e., KB Home and McDonalds go up and down completely randomly.
Pair Corralation between KB Home and McDonalds
Assuming the 90 days trading horizon KB Home is expected to under-perform the McDonalds. In addition to that, KB Home is 1.14 times more volatile than McDonalds. It trades about -0.21 of its total potential returns per unit of risk. McDonalds is currently generating about 0.06 per unit of volatility. If you would invest 586,447 in McDonalds on September 4, 2024 and sell it today you would earn a total of 9,553 from holding McDonalds or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
KB Home vs. McDonalds
Performance |
| Timeline |
| KB Home |
| McDonalds |
KB Home and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and McDonalds
The main advantage of trading using opposite KB Home and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' long position.| KB Home vs. Micron Technology | KB Home vs. UnitedHealth Group Incorporated | KB Home vs. Grupo Sports World | KB Home vs. GMxico Transportes SAB |
| McDonalds vs. KB Home | McDonalds vs. Grupo Sports World | McDonalds vs. Monster Beverage Corp | McDonalds vs. FIBRA Storage |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |