Correlation Between KB Home and IPC MEXICO
Can any of the company-specific risk be diversified away by investing in both KB Home and IPC MEXICO 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 IPC MEXICO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and IPC MEXICO, you can compare the effects of market volatilities on KB Home and IPC MEXICO 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 IPC MEXICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and IPC MEXICO.
Diversification Opportunities for KB Home and IPC MEXICO
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KBH and IPC is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and IPC MEXICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPC MEXICO 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 IPC MEXICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPC MEXICO has no effect on the direction of KB Home i.e., KB Home and IPC MEXICO go up and down completely randomly.
Pair Corralation between KB Home and IPC MEXICO
Assuming the 90 days trading horizon KB Home is expected to under-perform the IPC MEXICO. In addition to that, KB Home is 2.4 times more volatile than IPC MEXICO. It trades about -0.21 of its total potential returns per unit of risk. IPC MEXICO is currently generating about -0.12 per unit of volatility. If you would invest 5,116,629 in IPC MEXICO on August 28, 2024 and sell it today you would lose (93,866) from holding IPC MEXICO or give up 1.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
KB Home vs. IPC MEXICO
Performance |
| Timeline |
KB Home and IPC MEXICO Volatility Contrast
Predicted Return Density |
| Returns |
KB Home
Pair trading matchups for KB Home
IPC MEXICO
Pair trading matchups for IPC MEXICO
Pair Trading with KB Home and IPC MEXICO
The main advantage of trading using opposite KB Home and IPC MEXICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, IPC MEXICO 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 IPC MEXICO will offset losses from the drop in IPC MEXICO's long position.The idea behind KB Home and IPC MEXICO 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.| IPC MEXICO vs. Grupo Carso SAB | IPC MEXICO vs. McEwen Mining | IPC MEXICO vs. Cognizant Technology Solutions | IPC MEXICO vs. Taiwan Semiconductor Manufacturing |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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