Correlation Between KB HOME and Aedas Homes

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

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

Diversification Opportunities for KB HOME and Aedas Homes

-0.34

Correlation Coefficient

KB HOME  Aedas Homes

Very good diversification

The 3 months correlation between KBH and Aedas is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA 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 Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of KB HOME i.e., KB HOME and Aedas Homes go up and down completely randomly.

Pair Corralation between KB HOME and Aedas Homes

Assuming the 90 days trading horizon KB HOME is expected to under-perform the Aedas Homes. But the stock apears to be less risky and, when comparing its historical volatility, KB HOME is 1.07 times less risky than Aedas Homes. The stock trades about -0.11 of its potential returns per unit of risk. The Aedas Homes SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,510  in Aedas Homes SA on December 28, 2024 and sell it today you would earn a total of  185.00  from holding Aedas Homes SA or generate 7.37% return on investment over 90 days.

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

KB HOME  vs.  Aedas Homes SA

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Aedas Homes SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KB HOME and Aedas Homes

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

The idea behind KB HOME and Aedas Homes SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..