Correlation Between KB Home and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both KB Home and Medtronic PLC 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 Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Medtronic PLC, you can compare the effects of market volatilities on KB Home and Medtronic PLC 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 Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Medtronic PLC.
Diversification Opportunities for KB Home and Medtronic PLC
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between KBH and Medtronic is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of KB Home i.e., KB Home and Medtronic PLC go up and down completely randomly.
Pair Corralation between KB Home and Medtronic PLC
Considering the 90-day investment horizon KB Home is expected to generate 1.86 times more return on investment than Medtronic PLC. However, KB Home is 1.86 times more volatile than Medtronic PLC. It trades about 0.08 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.09 per unit of risk. If you would invest 5,930 in KB Home on January 26, 2024 and sell it today you would earn a total of 549.00 from holding KB Home or generate 9.26% 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. Medtronic PLC
Performance |
| Timeline |
| KB Home |
| Medtronic PLC |
KB Home and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB Home and Medtronic PLC
The main advantage of trading using opposite KB Home and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Medtronic PLC 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| KB Home vs. Api GroupCorp | KB Home vs. MYR Group | KB Home vs. Comfort Systems USA | KB Home vs. Construction Partners |
| Medtronic PLC vs. Orthopediatrics Corp | Medtronic PLC vs. Varex Imaging Corp | Medtronic PLC vs. Sight Sciences | Medtronic PLC vs. Iradimed Co |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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