Correlation Between KB Home and FIBRA Storage

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

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

Diversification Opportunities for KB Home and FIBRA Storage

-0.48

Correlation Coefficient

KB Home  FIBRA Storage

Very good diversification

The 3 months correlation between KBH and FIBRA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and FIBRA Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Storage 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 FIBRA Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Storage has no effect on the direction of KB Home i.e., KB Home and FIBRA Storage go up and down completely randomly.

Pair Corralation between KB Home and FIBRA Storage

Assuming the 90 days trading horizon KB Home is expected to under-perform the FIBRA Storage. But the stock apears to be less risky and, when comparing its historical volatility, KB Home is 1.95 times less risky than FIBRA Storage. The stock trades about -0.07 of its potential returns per unit of risk. The FIBRA Storage is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,744  in FIBRA Storage on December 28, 2024 and sell it today you would earn a total of  281.00  from holding FIBRA Storage or generate 16.11% 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.  FIBRA Storage

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.

FIBRA Storage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FIBRA Storage exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Home and FIBRA Storage

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

The idea behind KB Home and FIBRA Storage 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.