Correlation Between KB Home and Exxon
Can any of the company-specific risk be diversified away by investing in both KB Home and Exxon 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 Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Exxon Mobil, you can compare the effects of market volatilities on KB Home and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Exxon.
Diversification Opportunities for KB Home and Exxon
Poor diversification
The 3 months correlation between KBH and Exxon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of KB Home i.e., KB Home and Exxon go up and down completely randomly.
Pair Corralation between KB Home and Exxon
Assuming the 90 days trading horizon KB Home is expected to under-perform the Exxon. In addition to that, KB Home is 1.08 times more volatile than Exxon Mobil. It trades about -0.21 of its total potential returns per unit of risk. Exxon Mobil is currently generating about 0.12 per unit of volatility. If you would invest 231,757 in Exxon Mobil on September 1, 2024 and sell it today you would earn a total of 8,743 from holding Exxon Mobil or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
KB Home vs. Exxon Mobil
Performance |
| Timeline |
| KB Home |
| Exxon Mobil |
KB Home and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Exxon
The main advantage of trading using opposite KB Home and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| KB Home vs. Lennar | KB Home vs. Desarrolladora Homex SAB | KB Home vs. Urbi Desarrollos Urbanos | KB Home vs. Sare Holding SAB |
| Exxon vs. Grupo Carso SAB | Exxon vs. Taiwan Semiconductor Manufacturing | Exxon vs. Grupo Sports World | Exxon vs. Applied Materials |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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