Correlation Between KB HOME and American Homes
Can any of the company-specific risk be diversified away by investing in both KB HOME and American Homes 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 American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB HOME and American Homes 4, you can compare the effects of market volatilities on KB HOME and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and American Homes.
Diversification Opportunities for KB HOME and American Homes
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between KBH and American is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of KB HOME i.e., KB HOME and American Homes go up and down completely randomly.
Pair Corralation between KB HOME and American Homes
Assuming the 90 days trading horizon KB HOME is expected to generate 5.76 times less return on investment than American Homes. In addition to that, KB HOME is 1.31 times more volatile than American Homes 4. It trades about 0.0 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.02 per unit of volatility. If you would invest 3,371 in American Homes 4 on September 21, 2024 and sell it today you would earn a total of 89.00 from holding American Homes 4 or generate 2.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB HOME vs. American Homes 4
Performance |
| Timeline |
| KB HOME |
| American Homes 4 |
KB HOME and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB HOME and American Homes
The main advantage of trading using opposite KB HOME and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.The idea behind KB HOME and American Homes 4 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.| American Homes vs. INVITATION HOMES DL | American Homes vs. Superior Plus Corp | American Homes vs. SIVERS SEMICONDUCTORS AB | American Homes vs. NorAm Drilling AS |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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