Correlation Between KB HOME and KAUFMAN ET

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

By analyzing existing cross correlation between KB HOME and KAUFMAN ET BROAD, you can compare the effects of market volatilities on KB HOME and KAUFMAN ET 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 KAUFMAN ET. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and KAUFMAN ET.

Diversification Opportunities for KB HOME and KAUFMAN ET

0.1

Correlation Coefficient

KB HOME  KAUFMAN ET

Average diversification

The 3 months correlation between KBH and KAUFMAN is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and KAUFMAN ET BROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAUFMAN ET BROAD 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 KAUFMAN ET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAUFMAN ET BROAD has no effect on the direction of KB HOME i.e., KB HOME and KAUFMAN ET go up and down completely randomly.

Pair Corralation between KB HOME and KAUFMAN ET

Assuming the 90 days trading horizon KB HOME is expected to generate 1.15 times more return on investment than KAUFMAN ET. However, KB HOME is 1.15 times more volatile than KAUFMAN ET BROAD. It trades about 0.08 of its potential returns per unit of risk. KAUFMAN ET BROAD is currently generating about 0.04 per unit of risk. If you would invest  2,971  in KB HOME on September 25, 2024 and sell it today you would earn a total of  3,329  from holding KB HOME or generate 112.05% return on investment over 90 days.

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

KB HOME  vs.  KAUFMAN ET BROAD

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

KAUFMAN ET BROAD

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAUFMAN ET BROAD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, KAUFMAN ET is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KB HOME and KAUFMAN ET

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

The idea behind KB HOME and KAUFMAN ET BROAD 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.