Correlation Between KB Home and UTStarcom Holdings

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

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

Diversification Opportunities for KB Home and UTStarcom Holdings

0.24

Correlation Coefficient

KB Home  UTStarcom Holdings

Modest diversification

The 3 months correlation between KBH and UTStarcom is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and UTStarcom Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTStarcom Holdings Corp 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 UTStarcom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTStarcom Holdings Corp has no effect on the direction of KB Home i.e., KB Home and UTStarcom Holdings go up and down completely randomly.

Pair Corralation between KB Home and UTStarcom Holdings

Assuming the 90 days trading horizon KB Home is expected to under-perform the UTStarcom Holdings. In addition to that, KB Home is 1.37 times more volatile than UTStarcom Holdings Corp. It trades about -0.17 of its total potential returns per unit of risk. UTStarcom Holdings Corp is currently generating about 0.09 per unit of volatility. If you would invest  5,274  in UTStarcom Holdings Corp on September 27, 2024 and sell it today you would earn a total of  426.00  from holding UTStarcom Holdings Corp or generate 8.08% return on investment over 90 days.

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

KB Home  vs.  UTStarcom Holdings Corp

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

UTStarcom Holdings Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UTStarcom Holdings Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, UTStarcom Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KB Home and UTStarcom Holdings

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

The idea behind KB Home and UTStarcom Holdings Corp 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.