Correlation Between KB HOME and Public Storage

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

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

Diversification Opportunities for KB HOME and Public Storage

0.83

Correlation Coefficient

KB HOME  Public Storage

Very poor diversification

The 3 months correlation between KBH and Public is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of KB HOME i.e., KB HOME and Public Storage go up and down completely randomly.

Pair Corralation between KB HOME and Public Storage

Assuming the 90 days trading horizon KB HOME is expected to under-perform the Public Storage. In addition to that, KB HOME is 1.55 times more volatile than Public Storage. It trades about -0.14 of its total potential returns per unit of risk. Public Storage is currently generating about -0.16 per unit of volatility. If you would invest  32,362  in Public Storage on September 24, 2024 and sell it today you would lose (4,692) from holding Public Storage or give up 14.5% of portfolio value over 90 days.

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

KB HOME  vs.  Public Storage

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.

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Storage 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KB HOME and Public Storage

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

The idea behind KB HOME and Public Storage 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.