Correlation Between KB Home and Everus Construction
Can any of the company-specific risk be diversified away by investing in both KB Home and Everus Construction 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 Everus Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Everus Construction Group, you can compare the effects of market volatilities on KB Home and Everus Construction 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 Everus Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Everus Construction.
Diversification Opportunities for KB Home and Everus Construction
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KBH and Everus is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Everus Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everus Construction 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 Everus Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everus Construction has no effect on the direction of KB Home i.e., KB Home and Everus Construction go up and down completely randomly.
Pair Corralation between KB Home and Everus Construction
Considering the 90-day investment horizon KB Home is expected to generate 28.62 times less return on investment than Everus Construction. But when comparing it to its historical volatility, KB Home is 2.71 times less risky than Everus Construction. It trades about 0.03 of its potential returns per unit of risk. Everus Construction Group is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 4,900 in Everus Construction Group on August 24, 2024 and sell it today you would earn a total of 1,528 from holding Everus Construction Group or generate 31.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 86.36% |
| Values | Daily Returns |
KB Home vs. Everus Construction Group
Performance |
| Timeline |
| KB Home |
| Everus Construction |
KB Home and Everus Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Everus Construction
The main advantage of trading using opposite KB Home and Everus Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Everus Construction 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 Everus Construction will offset losses from the drop in Everus Construction's long position.The idea behind KB Home and Everus Construction Group 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.| Everus Construction vs. Beazer Homes USA | Everus Construction vs. Century Communities | Everus Construction vs. Dream Finders Homes | Everus Construction vs. Hovnanian Enterprises |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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