Correlation Between KB Home and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both KB Home and Dollar Tree 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 Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Dollar Tree, you can compare the effects of market volatilities on KB Home and Dollar Tree 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 Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Dollar Tree.
Diversification Opportunities for KB Home and Dollar Tree
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KBH and Dollar is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree 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 Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of KB Home i.e., KB Home and Dollar Tree go up and down completely randomly.
Pair Corralation between KB Home and Dollar Tree
Assuming the 90 days trading horizon KB Home is expected to generate 0.8 times more return on investment than Dollar Tree. However, KB Home is 1.24 times less risky than Dollar Tree. It trades about 0.07 of its potential returns per unit of risk. Dollar Tree is currently generating about -0.03 per unit of risk. If you would invest 92,624 in KB Home on October 3, 2024 and sell it today you would earn a total of 41,076 from holding KB Home or generate 44.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
KB Home vs. Dollar Tree
Performance |
Timeline |
KB Home |
Dollar Tree |
KB Home and Dollar Tree Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KB Home and Dollar Tree
The main advantage of trading using opposite KB Home and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Dollar Tree 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 Dollar Tree will offset losses from the drop in Dollar Tree's long position.KB Home vs. Grupo Sports World | KB Home vs. Verizon Communications | KB Home vs. Micron Technology | KB Home vs. Cognizant Technology Solutions |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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