Correlation Between KB Home and JetBlue Airways

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

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

Diversification Opportunities for KB Home and JetBlue Airways

0.55

Correlation Coefficient

KB Home  JetBlue Airways

Very weak diversification

The 3 months correlation between KBH and JetBlue is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and JetBlue Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways has no effect on the direction of KB Home i.e., KB Home and JetBlue Airways go up and down completely randomly.

Pair Corralation between KB Home and JetBlue Airways

Assuming the 90 days trading horizon KB Home is expected to generate 0.15 times more return on investment than JetBlue Airways. However, KB Home is 6.58 times less risky than JetBlue Airways. It trades about -0.07 of its potential returns per unit of risk. JetBlue Airways is currently generating about -0.11 per unit of risk. If you would invest  133,196  in KB Home on December 22, 2024 and sell it today you would lose (3,796) from holding KB Home or give up 2.85% of portfolio value over 90 days.

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

KB Home  vs.  JetBlue Airways

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 fairly strong technical indicators, KB Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JetBlue Airways

Risk-Adjusted Performance

Very Weak

Over the last 90 days JetBlue Airways 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 basic 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 KB Home and JetBlue Airways

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

The idea behind KB Home and JetBlue Airways 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.