Correlation Between NVR and Kaufman Broad

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

By analyzing existing cross correlation between NVR Inc and Kaufman Broad SA, you can compare the effects of market volatilities on NVR and Kaufman Broad 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 NVR with a short position of Kaufman Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVR and Kaufman Broad.

Diversification Opportunities for NVR and Kaufman Broad

0.29

Correlation Coefficient

NVR  Kaufman Broad

Modest diversification

The 3 months correlation between NVR and Kaufman is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NVR Inc and Kaufman Broad SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaufman Broad SA and NVR 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 NVR Inc are associated (or correlated) with Kaufman Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaufman Broad SA has no effect on the direction of NVR i.e., NVR and Kaufman Broad go up and down completely randomly.

Pair Corralation between NVR and Kaufman Broad

Assuming the 90 days horizon NVR Inc is expected to under-perform the Kaufman Broad. In addition to that, NVR is 1.15 times more volatile than Kaufman Broad SA. It trades about -0.14 of its total potential returns per unit of risk. Kaufman Broad SA is currently generating about -0.01 per unit of volatility. If you would invest  3,370  in Kaufman Broad SA on October 10, 2024 and sell it today you would lose (50.00) from holding Kaufman Broad SA or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

NVR Inc  vs.  Kaufman Broad SA

NVR Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Kaufman Broad SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaufman Broad SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kaufman Broad is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NVR and Kaufman Broad

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

The idea behind NVR Inc and Kaufman Broad SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.