Correlation Between KB HOME and CNOOC

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

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

Diversification Opportunities for KB HOME and CNOOC

-0.17

Correlation Coefficient

KB HOME  CNOOC

Good diversification

The 3 months correlation between KBH and CNOOC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and CNOOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC 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 CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC has no effect on the direction of KB HOME i.e., KB HOME and CNOOC go up and down completely randomly.

Pair Corralation between KB HOME and CNOOC

Assuming the 90 days trading horizon KB HOME is expected to under-perform the CNOOC. In addition to that, KB HOME is 3.37 times more volatile than CNOOC. It trades about -0.14 of its total potential returns per unit of risk. CNOOC is currently generating about -0.04 per unit of volatility. If you would invest  220.00  in CNOOC on September 19, 2024 and sell it today you would lose (2.00) from holding CNOOC or give up 0.91% of portfolio value over 90 days.

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

KB HOME  vs.  CNOOC

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.

CNOOC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNOOC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CNOOC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KB HOME and CNOOC

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

The idea behind KB HOME and CNOOC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.