Correlation Between Verizon Communications and KB Home

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

By analyzing existing cross correlation between Verizon Communications and KB Home, you can compare the effects of market volatilities on Verizon Communications and KB Home 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 Verizon Communications with a short position of KB Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and KB Home.

Diversification Opportunities for Verizon Communications and KB Home

0.14

Correlation Coefficient

Verizon Communications  KB Home

Average diversification

The 3 months correlation between Verizon and KBH is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and Verizon Communications 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 Verizon Communications are associated (or correlated) with KB Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Home has no effect on the direction of Verizon Communications i.e., Verizon Communications and KB Home go up and down completely randomly.

Pair Corralation between Verizon Communications and KB Home

If you would invest  67,648  in Verizon Communications on February 21, 2024 and sell it today you would earn a total of  552.00  from holding Verizon Communications or generate 0.82% return on investment over 90 days.

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

Verizon Communications  vs.  KB Home

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 fairly strong technical indicators, KB Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and KB Home

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

The idea behind Verizon Communications and KB Home 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.