Correlation Between United States and KB Home
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and KB Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and KB Home, you can compare the effects of market volatilities on United States 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 United States with a short position of KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and KB Home.
Diversification Opportunities for United States and KB Home
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and KBH is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and United States 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 United States Steel 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 United States i.e., United States and KB Home go up and down completely randomly.
Pair Corralation between United States and KB Home
Given the investment horizon of 90 days United States Steel is expected to generate 7.26 times more return on investment than KB Home. However, United States is 7.26 times more volatile than KB Home. It trades about 0.32 of its potential returns per unit of risk. KB Home is currently generating about 0.22 per unit of risk. If you would invest 62,996 in United States Steel on November 4, 2024 and sell it today you would earn a total of 11,884 from holding United States Steel or generate 18.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. KB Home
Performance |
| Timeline |
| United States Steel |
| KB Home |
United States and KB Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and KB Home
The main advantage of trading using opposite United States and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. McEwen Mining | United States vs. GMxico Transportes SAB | United States vs. Verizon Communications | United States vs. Deutsche Bank Aktiengesellschaft |
| KB Home vs. GMxico Transportes SAB | KB Home vs. Grupo Carso SAB | KB Home vs. Monster Beverage Corp | KB Home vs. FIBRA Storage |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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