Correlation Between KB Home and Vitro SAB

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

By analyzing existing cross correlation between KB Home and Vitro SAB de, you can compare the effects of market volatilities on KB Home and Vitro SAB 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 Vitro SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Vitro SAB.

Diversification Opportunities for KB Home and Vitro SAB

0.22

Correlation Coefficient

KB Home  Vitro SAB

Modest diversification

The 3 months correlation between KBH and Vitro is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Vitro SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitro SAB de 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 Vitro SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitro SAB de has no effect on the direction of KB Home i.e., KB Home and Vitro SAB go up and down completely randomly.

Pair Corralation between KB Home and Vitro SAB

Assuming the 90 days trading horizon KB Home is expected to under-perform the Vitro SAB. In addition to that, KB Home is 1.32 times more volatile than Vitro SAB de. It trades about -0.17 of its total potential returns per unit of risk. Vitro SAB de is currently generating about -0.01 per unit of volatility. If you would invest  900.00  in Vitro SAB de on September 30, 2024 and sell it today you would lose (12.00) from holding Vitro SAB de or give up 1.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

KB Home  vs.  Vitro SAB de

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.

Vitro SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vitro SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vitro SAB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KB Home and Vitro SAB

The main advantage of trading using opposite KB Home and Vitro SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Vitro SAB 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 Vitro SAB will offset losses from the drop in Vitro SAB's long position.

The idea behind KB Home and Vitro SAB de 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..