Correlation Between Verizon Communications and KB Home
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and KB Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and KB Home, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and KB Home.
Diversification Opportunities for Verizon Communications and KB Home
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Verizon and KBH is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and KB Home go up and down completely randomly.
Pair Corralation between Verizon Communications and KB Home
Assuming the 90 days horizon Verizon Communications is expected to generate 4.42 times less return on investment than KB Home. But when comparing it to its historical volatility, Verizon Communications is 1.5 times less risky than KB Home. It trades about 0.0 of its potential returns per unit of risk. KB Home is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 135,985 in KB Home on November 2, 2024 and sell it today you would earn a total of 15.00 from holding KB Home or generate 0.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. KB Home
Performance |
| Timeline |
| Verizon Communications |
| KB Home |
Verizon Communications and KB Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and KB Home
The main advantage of trading using opposite Verizon Communications and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Southwest Airlines | Verizon Communications vs. McEwen Mining | Verizon Communications vs. Martin Marietta Materials |
| KB Home vs. Verizon Communications | KB Home vs. Grupo Hotelero Santa | KB Home vs. Capital One Financial | KB Home vs. Costco Wholesale |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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