Correlation Between KB Home and Levi Strauss
Can any of the company-specific risk be diversified away by investing in both KB Home and Levi Strauss 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 Levi Strauss into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Levi Strauss Co, you can compare the effects of market volatilities on KB Home and Levi Strauss 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 Levi Strauss. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Levi Strauss.
Diversification Opportunities for KB Home and Levi Strauss
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KBH and Levi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of KB Home i.e., KB Home and Levi Strauss go up and down completely randomly.
Pair Corralation between KB Home and Levi Strauss
Considering the 90-day investment horizon KB Home is expected to generate 2.12 times more return on investment than Levi Strauss. However, KB Home is 2.12 times more volatile than Levi Strauss Co. It trades about 0.14 of its potential returns per unit of risk. Levi Strauss Co is currently generating about -0.31 per unit of risk. If you would invest 7,975 in KB Home on August 27, 2024 and sell it today you would earn a total of 528.00 from holding KB Home or generate 6.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Levi Strauss Co
Performance |
| Timeline |
| KB Home |
| Levi Strauss |
KB Home and Levi Strauss Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Levi Strauss
The main advantage of trading using opposite KB Home and Levi Strauss positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Levi Strauss 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 Levi Strauss will offset losses from the drop in Levi Strauss' long position.The idea behind KB Home and Levi Strauss Co 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.| Levi Strauss vs. LYFT Inc | Levi Strauss vs. Tapestry | Levi Strauss vs. Capri Holdings | Levi Strauss vs. YETI Holdings |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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