Correlation Between Kbi Metal and Home Center

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

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

Diversification Opportunities for Kbi Metal and Home Center

0.71

Correlation Coefficient

Kbi Metal  Home Center

Poor diversification

The 3 months correlation between Kbi and Home is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings and Kbi Metal 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 Kbi Metal Co are associated (or correlated) with Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of Kbi Metal i.e., Kbi Metal and Home Center go up and down completely randomly.

Pair Corralation between Kbi Metal and Home Center

Assuming the 90 days trading horizon Kbi Metal Co is expected to under-perform the Home Center. In addition to that, Kbi Metal is 1.29 times more volatile than Home Center Holdings. It trades about -0.11 of its total potential returns per unit of risk. Home Center Holdings is currently generating about -0.12 per unit of volatility. If you would invest  99,227  in Home Center Holdings on September 5, 2024 and sell it today you would lose (22,227) from holding Home Center Holdings or give up 22.4% of portfolio value over 90 days.

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

Kbi Metal Co  vs.  Home Center Holdings

Kbi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kbi Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Home Center Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Center Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kbi Metal and Home Center

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

The idea behind Kbi Metal Co and Home Center Holdings 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.