Correlation Between Goldman Sachs and KB Home

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

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

Diversification Opportunities for Goldman Sachs and KB Home

-0.4

Correlation Coefficient

Goldman Sachs  KB Home

Very good diversification

The 3 months correlation between Goldman and KBH is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Goldman Sachs and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and Goldman Sachs 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 The Goldman Sachs 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 Goldman Sachs i.e., Goldman Sachs and KB Home go up and down completely randomly.

Pair Corralation between Goldman Sachs and KB Home

Assuming the 90 days horizon The Goldman Sachs is expected to generate 0.77 times more return on investment than KB Home. However, The Goldman Sachs is 1.3 times less risky than KB Home. It trades about 0.1 of its potential returns per unit of risk. KB Home is currently generating about 0.0 per unit of risk. If you would invest  954,283  in The Goldman Sachs on December 5, 2024 and sell it today you would earn a total of  255,917  from holding The Goldman Sachs or generate 26.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.18%
Values	Daily Returns

The Goldman Sachs  vs.  KB Home

Goldman Sachs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

KB Home

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Goldman Sachs and KB Home

The main advantage of trading using opposite Goldman Sachs and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goldman Sachs 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 The Goldman Sachs 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.