Correlation Between KB Home and Skyline
Can any of the company-specific risk be diversified away by investing in both KB Home and Skyline 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 Skyline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Skyline, you can compare the effects of market volatilities on KB Home and Skyline 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 Skyline. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Skyline.
Diversification Opportunities for KB Home and Skyline
Modest diversification
The 3 months correlation between KBH and Skyline is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline 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 Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of KB Home i.e., KB Home and Skyline go up and down completely randomly.
Pair Corralation between KB Home and Skyline
Considering the 90-day investment horizon KB Home is expected to generate 9.09 times less return on investment than Skyline. In addition to that, KB Home is 1.04 times more volatile than Skyline. It trades about 0.03 of its total potential returns per unit of risk. Skyline is currently generating about 0.29 per unit of volatility. If you would invest 9,015 in Skyline on August 24, 2024 and sell it today you would earn a total of 993.00 from holding Skyline or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KB Home vs. Skyline
Performance |
| Timeline |
| KB Home |
| Skyline |
KB Home and Skyline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Skyline
The main advantage of trading using opposite KB Home and Skyline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Skyline 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 Skyline will offset losses from the drop in Skyline's long position.The idea behind KB Home and Skyline 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.| Skyline vs. MI Homes | Skyline vs. Century Communities | Skyline vs. Installed Building Products | Skyline vs. Legacy Housing Corp |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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