Correlation Between SMA Solar and KB HOME
Can any of the company-specific risk be diversified away by investing in both SMA Solar 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 SMA Solar and KB HOME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and KB HOME, you can compare the effects of market volatilities on SMA Solar 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 SMA Solar with a short position of KB HOME. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and KB HOME.
Diversification Opportunities for SMA Solar and KB HOME
Very good diversification
The 3 months correlation between SMA and KBH is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and KB HOME go up and down completely randomly.
Pair Corralation between SMA Solar and KB HOME
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the KB HOME. In addition to that, SMA Solar is 1.38 times more volatile than KB HOME. It trades about -0.09 of its total potential returns per unit of risk. KB HOME is currently generating about 0.11 per unit of volatility. If you would invest 6,300 in KB HOME on November 2, 2024 and sell it today you would earn a total of 300.00 from holding KB HOME or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMA Solar Technology vs. KB HOME
Performance |
| Timeline |
| SMA Solar Technology |
| KB HOME |
SMA Solar and KB HOME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and KB HOME
The main advantage of trading using opposite SMA Solar and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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.| SMA Solar vs. CN DATANG C | SMA Solar vs. Cass Information Systems | SMA Solar vs. PRECISION DRILLING P | SMA Solar vs. Automatic Data Processing |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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