Correlation Between KB Home and Visa
Can any of the company-specific risk be diversified away by investing in both KB Home and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Visa Inc, you can compare the effects of market volatilities on KB Home and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Visa.
Diversification Opportunities for KB Home and Visa
Excellent diversification
The 3 months correlation between KBH and Visa is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of KB Home i.e., KB Home and Visa go up and down completely randomly.
Pair Corralation between KB Home and Visa
Assuming the 90 days trading horizon KB Home is expected to under-perform the Visa. In addition to that, KB Home is 3.58 times more volatile than Visa Inc. It trades about -0.22 of its total potential returns per unit of risk. Visa Inc is currently generating about 0.06 per unit of volatility. If you would invest 630,002 in Visa Inc on October 14, 2024 and sell it today you would earn a total of 6,389 from holding Visa Inc or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Visa Inc
Performance |
| Timeline |
| KB Home |
| Visa Inc |
KB Home and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Visa
The main advantage of trading using opposite KB Home and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| KB Home vs. GMxico Transportes SAB | KB Home vs. Monster Beverage Corp | KB Home vs. The Home Depot | KB Home vs. Ameriprise Financial |
| Visa vs. KB Home | Visa vs. Prudential Financial | Visa vs. Applied Materials | Visa vs. New Oriental Education |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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