Correlation Between KB HOME and TTM Technologies
Can any of the company-specific risk be diversified away by investing in both KB HOME and TTM Technologies 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 TTM Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB HOME and TTM Technologies, you can compare the effects of market volatilities on KB HOME and TTM Technologies 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 TTM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and TTM Technologies.
Diversification Opportunities for KB HOME and TTM Technologies
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between KBH and TTM is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and TTM Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTM Technologies 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 TTM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTM Technologies has no effect on the direction of KB HOME i.e., KB HOME and TTM Technologies go up and down completely randomly.
Pair Corralation between KB HOME and TTM Technologies
Assuming the 90 days trading horizon KB HOME is expected to generate 14.55 times less return on investment than TTM Technologies. But when comparing it to its historical volatility, KB HOME is 1.1 times less risky than TTM Technologies. It trades about 0.02 of its potential returns per unit of risk. TTM Technologies is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,600 in TTM Technologies on September 12, 2024 and sell it today you would earn a total of 700.00 from holding TTM Technologies or generate 43.75% 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. TTM Technologies
Performance |
| Timeline |
| KB HOME |
| TTM Technologies |
KB HOME and TTM Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB HOME and TTM Technologies
The main advantage of trading using opposite KB HOME and TTM Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, TTM Technologies 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 TTM Technologies will offset losses from the drop in TTM Technologies' long position.The idea behind KB HOME and TTM Technologies 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.| TTM Technologies vs. Tsingtao Brewery | TTM Technologies vs. Corsair Gaming | TTM Technologies vs. Suntory Beverage Food | TTM Technologies vs. The Boston Beer |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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