Correlation Between KB HOME and Fomento Econmico

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

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

Diversification Opportunities for KB HOME and Fomento Econmico

0.21

Correlation Coefficient

KB HOME  Fomento Econmico

Modest diversification

The 3 months correlation between KBH and Fomento is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Fomento Econmico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Econmico Mexicano 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 Fomento Econmico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Econmico Mexicano has no effect on the direction of KB HOME i.e., KB HOME and Fomento Econmico go up and down completely randomly.

Pair Corralation between KB HOME and Fomento Econmico

Assuming the 90 days trading horizon KB HOME is expected to under-perform the Fomento Econmico. In addition to that, KB HOME is 1.19 times more volatile than Fomento Econmico Mexicano. It trades about -0.45 of its total potential returns per unit of risk. Fomento Econmico Mexicano is currently generating about -0.11 per unit of volatility. If you would invest  8,400  in Fomento Econmico Mexicano on September 24, 2024 and sell it today you would lose (350.00) from holding Fomento Econmico Mexicano or give up 4.17% of portfolio value over 90 days.

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

KB HOME  vs.  Fomento Econmico Mexicano

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.

Fomento Econmico Mexicano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fomento Econmico Mexicano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KB HOME and Fomento Econmico

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

The idea behind KB HOME and Fomento Econmico Mexicano 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.