Correlation Between KB Home and Inbar Group
Can any of the company-specific risk be diversified away by investing in both KB Home and Inbar Group 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 Inbar Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Inbar Group Finance, you can compare the effects of market volatilities on KB Home and Inbar Group 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 Inbar Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Inbar Group.
Diversification Opportunities for KB Home and Inbar Group
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KBH and Inbar is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Inbar Group Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inbar Group Finance 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 Inbar Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inbar Group Finance has no effect on the direction of KB Home i.e., KB Home and Inbar Group go up and down completely randomly.
Pair Corralation between KB Home and Inbar Group
Considering the 90-day investment horizon KB Home is expected to generate 0.24 times more return on investment than Inbar Group. However, KB Home is 4.11 times less risky than Inbar Group. It trades about -0.37 of its potential returns per unit of risk. Inbar Group Finance is currently generating about -0.19 per unit of risk. If you would invest 6,989 in KB Home on January 20, 2024 and sell it today you would lose (948.00) from holding KB Home or give up 13.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 86.36% |
| Values | Daily Returns |
KB Home vs. Inbar Group Finance
Performance |
| Timeline |
| KB Home |
| Inbar Group Finance |
KB Home and Inbar Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Inbar Group
The main advantage of trading using opposite KB Home and Inbar Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Inbar Group 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 Inbar Group will offset losses from the drop in Inbar Group's long position.The idea behind KB Home and Inbar Group Finance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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