Correlation Between KB HOME and Flutter Entertainment

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

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

Diversification Opportunities for KB HOME and Flutter Entertainment

-0.19

Correlation Coefficient

KB HOME  Flutter Entertainment

Good diversification

The 3 months correlation between KBH and Flutter is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment PLC 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of KB HOME i.e., KB HOME and Flutter Entertainment go up and down completely randomly.

Pair Corralation between KB HOME and Flutter Entertainment

Assuming the 90 days trading horizon KB HOME is expected to generate 0.95 times more return on investment than Flutter Entertainment. However, KB HOME is 1.06 times less risky than Flutter Entertainment. It trades about 0.05 of its potential returns per unit of risk. Flutter Entertainment PLC is currently generating about 0.04 per unit of risk. If you would invest  4,606  in KB HOME on October 22, 2024 and sell it today you would earn a total of  2,094  from holding KB HOME or generate 45.46% 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.  Flutter Entertainment PLC

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 unsteady 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.

Flutter Entertainment PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Flutter Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB HOME and Flutter Entertainment

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

The idea behind KB HOME and Flutter Entertainment PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.