Correlation Between TFS FINANCIAL and KB HOME
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL and KB HOME 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 TFS FINANCIAL and KB HOME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and KB HOME, you can compare the effects of market volatilities on TFS FINANCIAL and KB HOME 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 TFS FINANCIAL with a short position of KB HOME. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and KB HOME.
Diversification Opportunities for TFS FINANCIAL and KB HOME
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between TFS and KBH is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and KB HOME go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and KB HOME
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.74 times more return on investment than KB HOME. However, TFS FINANCIAL is 1.74 times more volatile than KB HOME. It trades about 0.27 of its potential returns per unit of risk. KB HOME is currently generating about 0.14 per unit of risk. If you would invest 1,180 in TFS FINANCIAL on August 26, 2024 and sell it today you would earn a total of 190.00 from holding TFS FINANCIAL or generate 16.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFS FINANCIAL vs. KB HOME
Performance |
| Timeline |
| TFS FINANCIAL |
| KB HOME |
TFS FINANCIAL and KB HOME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFS FINANCIAL and KB HOME
The main advantage of trading using opposite TFS FINANCIAL and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL position performs unexpectedly, KB HOME 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 KB HOME will offset losses from the drop in KB HOME's long position.| TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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