Correlation Between KB Home and Intuit

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

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

Diversification Opportunities for KB Home and Intuit

-0.21

Correlation Coefficient

KB Home  Intuit

Very good diversification

The 3 months correlation between KBH and Intuit is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Intuit Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuit Inc 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 Intuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intuit Inc has no effect on the direction of KB Home i.e., KB Home and Intuit go up and down completely randomly.

Pair Corralation between KB Home and Intuit

Assuming the 90 days trading horizon KB Home is expected to generate 1.31 times more return on investment than Intuit. However, KB Home is 1.31 times more volatile than Intuit Inc. It trades about 0.09 of its potential returns per unit of risk. Intuit Inc is currently generating about 0.07 per unit of risk. If you would invest  53,690  in KB Home on October 13, 2024 and sell it today you would earn a total of  80,010  from holding KB Home or generate 149.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

KB Home  vs.  Intuit Inc

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

Intuit Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intuit Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Intuit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KB Home and Intuit

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

The idea behind KB Home and Intuit Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.