Correlation Between KB HOME and TOTAL GABON
Can any of the company-specific risk be diversified away by investing in both KB HOME and TOTAL GABON 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 TOTAL GABON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB HOME and TOTAL GABON, you can compare the effects of market volatilities on KB HOME and TOTAL GABON 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 TOTAL GABON. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and TOTAL GABON.
Diversification Opportunities for KB HOME and TOTAL GABON
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KBH and TOTAL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and TOTAL GABON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL GABON 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 TOTAL GABON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL GABON has no effect on the direction of KB HOME i.e., KB HOME and TOTAL GABON go up and down completely randomly.
Pair Corralation between KB HOME and TOTAL GABON
Assuming the 90 days trading horizon KB HOME is expected to generate 6.97 times less return on investment than TOTAL GABON. But when comparing it to its historical volatility, KB HOME is 1.11 times less risky than TOTAL GABON. It trades about 0.02 of its potential returns per unit of risk. TOTAL GABON is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 15,850 in TOTAL GABON on September 12, 2024 and sell it today you would earn a total of 2,850 from holding TOTAL GABON or generate 17.98% 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. TOTAL GABON
Performance |
| Timeline |
| KB HOME |
| TOTAL GABON |
KB HOME and TOTAL GABON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB HOME and TOTAL GABON
The main advantage of trading using opposite KB HOME and TOTAL GABON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, TOTAL GABON 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 TOTAL GABON will offset losses from the drop in TOTAL GABON's long position.The idea behind KB HOME and TOTAL GABON 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.| TOTAL GABON vs. TYSON FOODS A | TOTAL GABON vs. National Beverage Corp | TOTAL GABON vs. Food Life Companies | TOTAL GABON vs. SENECA FOODS A |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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