Correlation Between First Republic and KB Home

Can any of the company-specific risk be diversified away by investing in both First Republic 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 First Republic and KB Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Republic Bank and KB Home, you can compare the effects of market volatilities on First Republic 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 First Republic with a short position of KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Republic and KB Home.

Diversification Opportunities for First Republic and KB Home

0.0

Correlation Coefficient

First Republic  KB Home

Pay attention - limited upside

The 3 months correlation between First and KBH is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and First Republic 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 First Republic Bank 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 First Republic i.e., First Republic and KB Home go up and down completely randomly.

Pair Corralation between First Republic and KB Home

If you would invest  6,095  in First Republic Bank on September 28, 2024 and sell it today you would earn a total of  0.00  from holding First Republic Bank or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Republic Bank  vs.  KB Home

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, First Republic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KB Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with First Republic and KB Home

The main advantage of trading using opposite First Republic and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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.

The idea behind First Republic Bank and KB Home 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.

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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.