Correlation Between KB HOME and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both KB HOME and Cisco Systems 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 Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB HOME and Cisco Systems, you can compare the effects of market volatilities on KB HOME and Cisco Systems 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and Cisco Systems.
Diversification Opportunities for KB HOME and Cisco Systems
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between KBH and Cisco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of KB HOME i.e., KB HOME and Cisco Systems go up and down completely randomly.
Pair Corralation between KB HOME and Cisco Systems
Assuming the 90 days trading horizon KB HOME is expected to generate 1.2 times less return on investment than Cisco Systems. In addition to that, KB HOME is 1.92 times more volatile than Cisco Systems. It trades about 0.08 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.19 per unit of volatility. If you would invest 4,177 in Cisco Systems on September 3, 2024 and sell it today you would earn a total of 1,462 from holding Cisco Systems or generate 35.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB HOME vs. Cisco Systems
Performance |
| Timeline |
| KB HOME |
| Cisco Systems |
KB HOME and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB HOME and Cisco Systems
The main advantage of trading using opposite KB HOME and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.The idea behind KB HOME and Cisco Systems 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.| Cisco Systems vs. KB HOME | Cisco Systems vs. INVITATION HOMES DL | Cisco Systems vs. 24SEVENOFFICE GROUP AB | Cisco Systems vs. Haier Smart 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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