Correlation Between KB HOME and National Storage
Can any of the company-specific risk be diversified away by investing in both KB HOME and National Storage 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 National Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB HOME and National Storage Affiliates, you can compare the effects of market volatilities on KB HOME and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB HOME and National Storage.
Diversification Opportunities for KB HOME and National Storage
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KBH and National is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of KB HOME i.e., KB HOME and National Storage go up and down completely randomly.
Pair Corralation between KB HOME and National Storage
Assuming the 90 days trading horizon KB HOME is expected to under-perform the National Storage. In addition to that, KB HOME is 1.33 times more volatile than National Storage Affiliates. It trades about -0.14 of its total potential returns per unit of risk. National Storage Affiliates is currently generating about -0.13 per unit of volatility. If you would invest 4,338 in National Storage Affiliates on September 24, 2024 and sell it today you would lose (620.00) from holding National Storage Affiliates or give up 14.29% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
KB HOME vs. National Storage Affiliates
Performance |
Timeline |
KB HOME |
National Storage Aff |
KB HOME and National Storage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KB HOME and National Storage
The main advantage of trading using opposite KB HOME and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB HOME position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.The idea behind KB HOME and National Storage Affiliates 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.National Storage vs. Extra Space Storage | National Storage vs. REXFORD INDREALTY DL 01 | National Storage vs. CubeSmart | National Storage vs. First Industrial Realty |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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