Correlation Between KB Home and Sekisui House

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

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

Diversification Opportunities for KB Home and Sekisui House

0.06

Correlation Coefficient

KB Home  Sekisui House

Significant diversification

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

Pair Corralation between KB Home and Sekisui House

Considering the 90-day investment horizon KB Home is expected to under-perform the Sekisui House. But the stock apears to be less risky and, when comparing its historical volatility, KB Home is 1.7 times less risky than Sekisui House. The stock trades about -0.07 of its potential returns per unit of risk. The Sekisui House is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,274  in Sekisui House on December 27, 2024 and sell it today you would earn a total of  65.00  from holding Sekisui House or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

KB Home  vs.  Sekisui House

KB Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days KB Home has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Sekisui House

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui House are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Sekisui House may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KB Home and Sekisui House

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

The idea behind KB Home and Sekisui House 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.