Correlation Between KB Home and Sturm Ruger
Can any of the company-specific risk be diversified away by investing in both KB Home and Sturm Ruger 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 Sturm Ruger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Sturm Ruger, you can compare the effects of market volatilities on KB Home and Sturm Ruger 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 Sturm Ruger. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Sturm Ruger.
Diversification Opportunities for KB Home and Sturm Ruger
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KBH and Sturm is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Sturm Ruger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturm Ruger 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 Sturm Ruger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sturm Ruger has no effect on the direction of KB Home i.e., KB Home and Sturm Ruger go up and down completely randomly.
Pair Corralation between KB Home and Sturm Ruger
Considering the 90-day investment horizon KB Home is expected to generate 1.57 times more return on investment than Sturm Ruger. However, KB Home is 1.57 times more volatile than Sturm Ruger. It trades about 0.08 of its potential returns per unit of risk. Sturm Ruger is currently generating about -0.04 per unit of risk. If you would invest 5,315 in KB Home on August 27, 2024 and sell it today you would earn a total of 2,625 from holding KB Home or generate 49.39% 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. Sturm Ruger
Performance |
| Timeline |
| KB Home |
| Sturm Ruger |
KB Home and Sturm Ruger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Sturm Ruger
The main advantage of trading using opposite KB Home and Sturm Ruger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Sturm Ruger 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 Sturm Ruger will offset losses from the drop in Sturm Ruger's long position.The idea behind KB Home and Sturm Ruger 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.| Sturm Ruger vs. MCBC Holdings | Sturm Ruger vs. Winnebago Industries | Sturm Ruger vs. LCI Industries | Sturm Ruger vs. Thor Industries |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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