Correlation Between Hoteles City and KB Home

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

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

Diversification Opportunities for Hoteles City and KB Home

0.44

Correlation Coefficient

Hoteles City  KB Home

Very weak diversification

The 3 months correlation between Hoteles and KBH is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hoteles City Express and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and Hoteles City 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 Hoteles City Express 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 Hoteles City i.e., Hoteles City and KB Home go up and down completely randomly.

Pair Corralation between Hoteles City and KB Home

Assuming the 90 days trading horizon Hoteles City Express is expected to generate 0.78 times more return on investment than KB Home. However, Hoteles City Express is 1.28 times less risky than KB Home. It trades about -0.06 of its potential returns per unit of risk. KB Home is currently generating about -0.22 per unit of risk. If you would invest  456.00  in Hoteles City Express on September 26, 2024 and sell it today you would lose (16.00) from holding Hoteles City Express or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hoteles City Express  vs.  KB Home

Hoteles City Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles City Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Hoteles City is not utilizing all of its potentials. The current stock price disarray, 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 Hoteles City and KB Home

The main advantage of trading using opposite Hoteles City and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hoteles City 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 Hoteles City Express 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.