Correlation Between KB Home and SAP SE
Can any of the company-specific risk be diversified away by investing in both KB Home and SAP SE 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 SAP SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and SAP SE, you can compare the effects of market volatilities on KB Home and SAP SE 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 SAP SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and SAP SE.
Diversification Opportunities for KB Home and SAP SE
Very good diversification
The 3 months correlation between KBH and SAP is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 SAP SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of KB Home i.e., KB Home and SAP SE go up and down completely randomly.
Pair Corralation between KB Home and SAP SE
Assuming the 90 days trading horizon KB Home is expected to under-perform the SAP SE. In addition to that, KB Home is 3.22 times more volatile than SAP SE. It trades about -0.22 of its total potential returns per unit of risk. SAP SE is currently generating about 0.21 per unit of volatility. If you would invest 479,440 in SAP SE on September 25, 2024 and sell it today you would earn a total of 20,560 from holding SAP SE or generate 4.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
KB Home vs. SAP SE
Performance |
Timeline |
KB Home |
SAP SE |
KB Home and SAP SE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KB Home and SAP SE
The main advantage of trading using opposite KB Home and SAP SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, SAP SE 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 SAP SE will offset losses from the drop in SAP SE's long position.KB Home vs. Lennar | KB Home vs. PulteGroup | KB Home vs. Servicios Corporativos Javer | KB Home vs. Desarrolladora Homex SAB |
SAP SE vs. Grupo Carso SAB | SAP SE vs. Cognizant Technology Solutions | SAP SE vs. Micron Technology | SAP SE vs. First Republic Bank |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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