Correlation Between KB HOME and FEMALE HEALTH

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

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

Diversification Opportunities for KB HOME and FEMALE HEALTH

-0.08

Correlation Coefficient

KB HOME  FEMALE HEALTH

Good diversification

The 3 months correlation between KBH and FEMALE is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE HEALTH 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 FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of KB HOME i.e., KB HOME and FEMALE HEALTH go up and down completely randomly.

Pair Corralation between KB HOME and FEMALE HEALTH

Assuming the 90 days trading horizon KB HOME is expected to generate 2.08 times less return on investment than FEMALE HEALTH. But when comparing it to its historical volatility, KB HOME is 2.67 times less risky than FEMALE HEALTH. It trades about 0.04 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  65.00  in FEMALE HEALTH on September 20, 2024 and sell it today you would earn a total of  2.00  from holding FEMALE HEALTH or generate 3.08% 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.  FEMALE HEALTH

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.

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH 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 FEMALE HEALTH

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

The idea behind KB HOME and FEMALE HEALTH 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..