Correlation Between Copart and KB HOME

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

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

Diversification Opportunities for Copart and KB HOME

-0.05

Correlation Coefficient

Copart  KB HOME

Good diversification

The 3 months correlation between Copart and KBH is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Copart Inc and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and Copart 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 Copart Inc 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 Copart i.e., Copart and KB HOME go up and down completely randomly.

Pair Corralation between Copart and KB HOME

Assuming the 90 days horizon Copart Inc is expected to generate 1.3 times more return on investment than KB HOME. However, Copart is 1.3 times more volatile than KB HOME. It trades about 0.1 of its potential returns per unit of risk. KB HOME is currently generating about -0.1 per unit of risk. If you would invest  4,790  in Copart Inc on October 7, 2024 and sell it today you would earn a total of  674.00  from holding Copart Inc or generate 14.07% return on investment over 90 days.

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

Copart Inc  vs.  KB HOME

Copart Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Copart Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Copart reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Copart and KB HOME

The main advantage of trading using opposite Copart and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copart 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 Copart Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.