Correlation Between KB HOME and FAST RETAIL

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

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

Diversification Opportunities for KB HOME and FAST RETAIL

-0.2

Correlation Coefficient

KB HOME  FAST RETAIL

Good diversification

The 3 months correlation between KBH and FAST is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR 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 FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of KB HOME i.e., KB HOME and FAST RETAIL go up and down completely randomly.

Pair Corralation between KB HOME and FAST RETAIL

Assuming the 90 days trading horizon KB HOME is expected to under-perform the FAST RETAIL. In addition to that, KB HOME is 1.16 times more volatile than FAST RETAIL ADR. It trades about -0.14 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.07 per unit of volatility. If you would invest  2,940  in FAST RETAIL ADR on September 23, 2024 and sell it today you would earn a total of  240.00  from holding FAST RETAIL ADR or generate 8.16% 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.  FAST RETAIL ADR

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.

FAST RETAIL ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FAST RETAIL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KB HOME and FAST RETAIL

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

The idea behind KB HOME and FAST RETAIL ADR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.