Correlation Between KB HOME and Addus HomeCare

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

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

Diversification Opportunities for KB HOME and Addus HomeCare

0.93

Correlation Coefficient

KB HOME  Addus HomeCare

Almost no diversification

The 3 months correlation between KBH and Addus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of KB HOME i.e., KB HOME and Addus HomeCare go up and down completely randomly.

Pair Corralation between KB HOME and Addus HomeCare

Assuming the 90 days trading horizon KB HOME is expected to generate 0.83 times more return on investment than Addus HomeCare. However, KB HOME is 1.21 times less risky than Addus HomeCare. It trades about -0.11 of its potential returns per unit of risk. Addus HomeCare is currently generating about -0.21 per unit of risk. If you would invest  6,177  in KB HOME on December 28, 2024 and sell it today you would lose (827.00) from holding KB HOME or give up 13.39% of portfolio value over 90 days.

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

KB HOME  vs.  Addus HomeCare

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.

Addus HomeCare

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KB HOME and Addus HomeCare

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

The idea behind KB HOME and Addus HomeCare 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.