Correlation Between KB Home and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both KB Home and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and The Travelers Companies, you can compare the effects of market volatilities on KB Home and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Travelers Companies.
Diversification Opportunities for KB Home and Travelers Companies
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KBH and Travelers is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of KB Home i.e., KB Home and Travelers Companies go up and down completely randomly.
Pair Corralation between KB Home and Travelers Companies
Assuming the 90 days trading horizon KB Home is expected to generate 1.09 times less return on investment than Travelers Companies. But when comparing it to its historical volatility, KB Home is 1.12 times less risky than Travelers Companies. It trades about 0.07 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 326,008 in The Travelers Companies on October 16, 2024 and sell it today you would earn a total of 199,241 from holding The Travelers Companies or generate 61.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. The Travelers Companies
Performance |
| Timeline |
| KB Home |
| The Travelers Companies |
KB Home and Travelers Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Travelers Companies
The main advantage of trading using opposite KB Home and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.| KB Home vs. GMxico Transportes SAB | KB Home vs. Verizon Communications | KB Home vs. United Airlines Holdings | KB Home vs. Samsung Electronics Co |
| Travelers Companies vs. Cognizant Technology Solutions | Travelers Companies vs. Grupo Carso SAB | Travelers Companies vs. McEwen Mining | Travelers Companies vs. KB Home |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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