Correlation Between Ebro Foods and KB HOME

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

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

Diversification Opportunities for Ebro Foods and KB HOME

-0.01

Correlation Coefficient

Ebro Foods  KB HOME

Good diversification

The 3 months correlation between Ebro and KBH is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ebro Foods SA and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and Ebro Foods 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 Ebro Foods SA 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 Ebro Foods i.e., Ebro Foods and KB HOME go up and down completely randomly.

Pair Corralation between Ebro Foods and KB HOME

Assuming the 90 days horizon Ebro Foods SA is expected to under-perform the KB HOME. But the stock apears to be less risky and, when comparing its historical volatility, Ebro Foods SA is 1.48 times less risky than KB HOME. The stock trades about -0.14 of its potential returns per unit of risk. The KB HOME is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  7,325  in KB HOME on September 4, 2024 and sell it today you would earn a total of  575.00  from holding KB HOME or generate 7.85% return on investment over 90 days.

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

Ebro Foods SA  vs.  KB HOME

Ebro Foods SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ebro Foods SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ebro Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KB HOME

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KB HOME are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, KB HOME may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ebro Foods and KB HOME

The main advantage of trading using opposite Ebro Foods and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ebro Foods 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 Ebro Foods SA 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.