Correlation Between KB Home and Century Communities
Can any of the company-specific risk be diversified away by investing in both KB Home and Century Communities 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 Century Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Century Communities, you can compare the effects of market volatilities on KB Home and Century Communities 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 Century Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Century Communities.
Diversification Opportunities for KB Home and Century Communities
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KBH and Century is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Century Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Communities 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 Century Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Communities has no effect on the direction of KB Home i.e., KB Home and Century Communities go up and down completely randomly.
Pair Corralation between KB Home and Century Communities
Considering the 90-day investment horizon KB Home is expected to generate 0.9 times more return on investment than Century Communities. However, KB Home is 1.11 times less risky than Century Communities. It trades about 0.03 of its potential returns per unit of risk. Century Communities is currently generating about -0.1 per unit of risk. If you would invest 7,712 in KB Home on August 24, 2024 and sell it today you would earn a total of 67.00 from holding KB Home or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Century Communities
Performance |
| Timeline |
| KB Home |
| Century Communities |
KB Home and Century Communities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Century Communities
The main advantage of trading using opposite KB Home and Century Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Century Communities 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 Century Communities will offset losses from the drop in Century Communities' long position.The idea behind KB Home and Century Communities 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.| Century Communities vs. Taylor Morn Home | Century Communities vs. Beazer Homes USA | Century Communities vs. Meritage | Century Communities vs. TRI Pointe Homes |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |