Correlation Between KB Home and Dream Finders
Can any of the company-specific risk be diversified away by investing in both KB Home and Dream Finders 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 Dream Finders into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Dream Finders Homes, you can compare the effects of market volatilities on KB Home and Dream Finders 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 Dream Finders. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Dream Finders.
Diversification Opportunities for KB Home and Dream Finders
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between KBH and Dream is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Dream Finders Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Finders Homes 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 Dream Finders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Finders Homes has no effect on the direction of KB Home i.e., KB Home and Dream Finders go up and down completely randomly.
Pair Corralation between KB Home and Dream Finders
Considering the 90-day investment horizon KB Home is expected to generate 1.22 times less return on investment than Dream Finders. But when comparing it to its historical volatility, KB Home is 1.64 times less risky than Dream Finders. It trades about 0.08 of its potential returns per unit of risk. Dream Finders Homes is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,211 in Dream Finders Homes on November 1, 2024 and sell it today you would earn a total of 1,201 from holding Dream Finders Homes or generate 99.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Dream Finders Homes
Performance |
| Timeline |
| KB Home |
| Dream Finders Homes |
KB Home and Dream Finders Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Dream Finders
The main advantage of trading using opposite KB Home and Dream Finders positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Dream Finders 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 Dream Finders will offset losses from the drop in Dream Finders' long position.The idea behind KB Home and Dream Finders Homes 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.| Dream Finders vs. Hovnanian Enterprises | Dream Finders vs. Taylor Morn Home | Dream Finders vs. KB Home | Dream Finders vs. MI 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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |