Correlation Between KB HOME and Zions Bancorporation

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

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

Diversification Opportunities for KB HOME and Zions Bancorporation

0.06

Correlation Coefficient

KB HOME  Zions Bancorporation

Significant diversification

The 3 months correlation between KBH and Zions is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and Zions Bancorp. National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation 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 Zions Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zions Bancorporation has no effect on the direction of KB HOME i.e., KB HOME and Zions Bancorporation go up and down completely randomly.

Pair Corralation between KB HOME and Zions Bancorporation

Assuming the 90 days trading horizon KB HOME is expected to under-perform the Zions Bancorporation. But the stock apears to be less risky and, when comparing its historical volatility, KB HOME is 1.14 times less risky than Zions Bancorporation. The stock trades about -0.31 of its potential returns per unit of risk. The Zions Bancorporation National is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  5,450  in Zions Bancorporation National on October 16, 2024 and sell it today you would lose (246.00) from holding Zions Bancorporation National or give up 4.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

KB HOME  vs.  Zions Bancorp. National

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

Zions Bancorporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation National are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Zions Bancorporation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB HOME and Zions Bancorporation

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

The idea behind KB HOME and Zions Bancorporation National 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.