Correlation Between KB HOME and JD SPORTS

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

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

Diversification Opportunities for KB HOME and JD SPORTS

0.41

Correlation Coefficient

KB HOME  JD SPORTS

Very weak diversification

The 3 months correlation between KBH and 9JD is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and JD SPORTS FASH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD SPORTS FASH 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 JD SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD SPORTS FASH has no effect on the direction of KB HOME i.e., KB HOME and JD SPORTS go up and down completely randomly.

Pair Corralation between KB HOME and JD SPORTS

Assuming the 90 days trading horizon KB HOME is expected to generate 0.56 times more return on investment than JD SPORTS. However, KB HOME is 1.79 times less risky than JD SPORTS. It trades about -0.2 of its potential returns per unit of risk. JD SPORTS FASH is currently generating about -0.18 per unit of risk. If you would invest  7,425  in KB HOME on October 6, 2024 and sell it today you would lose (1,075) from holding KB HOME or give up 14.48% 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.  JD SPORTS FASH

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

JD SPORTS FASH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KB HOME and JD SPORTS

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

The idea behind KB HOME and JD SPORTS FASH 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.