Correlation Between KB Home and Legacy Housing
Can any of the company-specific risk be diversified away by investing in both KB Home and Legacy Housing 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 Legacy Housing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Legacy Housing Corp, you can compare the effects of market volatilities on KB Home and Legacy Housing 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 Legacy Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Legacy Housing.
Diversification Opportunities for KB Home and Legacy Housing
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KBH and Legacy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Legacy Housing Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Housing Corp 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 Legacy Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Housing Corp has no effect on the direction of KB Home i.e., KB Home and Legacy Housing go up and down completely randomly.
Pair Corralation between KB Home and Legacy Housing
Considering the 90-day investment horizon KB Home is expected to generate 1.06 times more return on investment than Legacy Housing. However, KB Home is 1.06 times more volatile than Legacy Housing Corp. It trades about 0.12 of its potential returns per unit of risk. Legacy Housing Corp is currently generating about 0.07 per unit of risk. If you would invest 7,812 in KB Home on August 31, 2024 and sell it today you would earn a total of 462.00 from holding KB Home or generate 5.91% 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. Legacy Housing Corp
Performance |
| Timeline |
| KB Home |
| Legacy Housing Corp |
KB Home and Legacy Housing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Legacy Housing
The main advantage of trading using opposite KB Home and Legacy Housing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Legacy Housing 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 Legacy Housing will offset losses from the drop in Legacy Housing's long position.| KB Home vs. Century Communities | KB Home vs. Dream Finders Homes | KB Home vs. DR Horton | KB Home vs. Everus Construction Group |
| Legacy Housing vs. MI Homes | Legacy Housing vs. Taylor Morn Home | Legacy Housing vs. TRI Pointe Homes | Legacy Housing vs. Beazer Homes USA |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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