Correlation Between KB HOME and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both KB HOME and Solstad Offshore 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 Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB HOME and Solstad Offshore ASA, you can compare the effects of market volatilities on KB HOME and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and Solstad Offshore.
Diversification Opportunities for KB HOME and Solstad Offshore
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KBH and Solstad is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of KB HOME i.e., KB HOME and Solstad Offshore go up and down completely randomly.
Pair Corralation between KB HOME and Solstad Offshore
Assuming the 90 days trading horizon KB HOME is expected to generate 3.96 times less return on investment than Solstad Offshore. But when comparing it to its historical volatility, KB HOME is 3.76 times less risky than Solstad Offshore. It trades about 0.23 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 268.00 in Solstad Offshore ASA on September 4, 2024 and sell it today you would earn a total of 81.00 from holding Solstad Offshore ASA or generate 30.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
KB HOME vs. Solstad Offshore ASA
Performance |
| Timeline |
| KB HOME |
| Solstad Offshore ASA |
KB HOME and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB HOME and Solstad Offshore
The main advantage of trading using opposite KB HOME and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.The idea behind KB HOME and Solstad Offshore ASA 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.| Solstad Offshore vs. Wilh Wilhelmsen Holding | Solstad Offshore vs. Superior Plus Corp | Solstad Offshore vs. NMI Holdings | Solstad Offshore vs. Origin Agritech |
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 CEOs Directory module to screen CEOs from public companies around the world.
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