Correlation Between KB HOME and TTW Public

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

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

Diversification Opportunities for KB HOME and TTW Public

-0.02

Correlation Coefficient

KB HOME  TTW Public

Good diversification

The 3 months correlation between KBH and TTW is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and TTW Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW Public 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 TTW Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW Public has no effect on the direction of KB HOME i.e., KB HOME and TTW Public go up and down completely randomly.

Pair Corralation between KB HOME and TTW Public

Assuming the 90 days trading horizon KB HOME is expected to under-perform the TTW Public. But the stock apears to be less risky and, when comparing its historical volatility, KB HOME is 1.43 times less risky than TTW Public. The stock trades about -0.34 of its potential returns per unit of risk. The TTW Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  24.00  in TTW Public on September 22, 2024 and sell it today you would earn a total of  0.00  from holding TTW Public or generate 0.0% 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.  TTW Public

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

TTW Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TTW Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TTW Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KB HOME and TTW Public

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

The idea behind KB HOME and TTW Public 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.