Correlation Between KB HOME and CeoTronics

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

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

Diversification Opportunities for KB HOME and CeoTronics

-0.12

Correlation Coefficient

KB HOME  CeoTronics

Good diversification

The 3 months correlation between KBH and CeoTronics is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of KB HOME i.e., KB HOME and CeoTronics go up and down completely randomly.

Pair Corralation between KB HOME and CeoTronics

Assuming the 90 days trading horizon KB HOME is expected to under-perform the CeoTronics. But the stock apears to be less risky and, when comparing its historical volatility, KB HOME is 1.48 times less risky than CeoTronics. The stock trades about -0.15 of its potential returns per unit of risk. The CeoTronics AG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  550.00  in CeoTronics AG on September 28, 2024 and sell it today you would earn a total of  40.00  from holding CeoTronics AG or generate 7.27% return on investment over 90 days.

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

KB HOME  vs.  CeoTronics AG

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CeoTronics AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KB HOME and CeoTronics

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

The idea behind KB HOME and CeoTronics AG 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.