Correlation Between KB Home and Ameriprise Financial

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Can any of the company-specific risk be diversified away by investing in both KB Home and Ameriprise Financial 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 KB Home and Ameriprise Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Ameriprise Financial, you can compare the effects of market volatilities on KB Home and Ameriprise Financial 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 KB Home with a short position of Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Ameriprise Financial.

Diversification Opportunities for KB Home and Ameriprise Financial

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between KBH and Ameriprise is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and KB Home 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 KB Home are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of KB Home i.e., KB Home and Ameriprise Financial go up and down completely randomly.

Pair Corralation between KB Home and Ameriprise Financial

Assuming the 90 days trading horizon KB Home is expected to under-perform the Ameriprise Financial. But the stock apears to be less risky and, when comparing its historical volatility, KB Home is 1.56 times less risky than Ameriprise Financial. The stock trades about -0.17 of its potential returns per unit of risk. The Ameriprise Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  909,771  in Ameriprise Financial on September 30, 2024 and sell it today you would earn a total of  185,929  from holding Ameriprise Financial or generate 20.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

KB Home  vs.  Ameriprise Financial

 Performance 
       Timeline  
KB Home 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Ameriprise Financial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ameriprise Financial showed solid returns over the last few months and may actually be approaching a breakup point.

KB Home and Ameriprise Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KB Home and Ameriprise Financial

The main advantage of trading using opposite KB Home and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.
The idea behind KB Home and Ameriprise Financial 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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