Correlation Between KB HOME and REVO INSURANCE

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

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

Diversification Opportunities for KB HOME and REVO INSURANCE

-0.5

Correlation Coefficient

KB HOME  REVO INSURANCE

Very good diversification

The 3 months correlation between KBH and REVO is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and REVO INSURANCE SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REVO INSURANCE SPA 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 REVO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REVO INSURANCE SPA has no effect on the direction of KB HOME i.e., KB HOME and REVO INSURANCE go up and down completely randomly.

Pair Corralation between KB HOME and REVO INSURANCE

Assuming the 90 days trading horizon KB HOME is expected to generate 1.89 times more return on investment than REVO INSURANCE. However, KB HOME is 1.89 times more volatile than REVO INSURANCE SPA. It trades about 0.07 of its potential returns per unit of risk. REVO INSURANCE SPA is currently generating about 0.07 per unit of risk. If you would invest  3,164  in KB HOME on October 2, 2024 and sell it today you would earn a total of  3,036  from holding KB HOME or generate 95.95% return on investment over 90 days.

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

KB HOME  vs.  REVO INSURANCE SPA

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.

REVO INSURANCE SPA

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB HOME and REVO INSURANCE

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

The idea behind KB HOME and REVO INSURANCE SPA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.