Correlation Between Strategic Education and KB HOME

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

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

Diversification Opportunities for Strategic Education and KB HOME

-0.09

Correlation Coefficient

Strategic Education  KB HOME

Good diversification

The 3 months correlation between Strategic and KBH is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and Strategic Education 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 Strategic Education are associated (or correlated) with KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of Strategic Education i.e., Strategic Education and KB HOME go up and down completely randomly.

Pair Corralation between Strategic Education and KB HOME

Assuming the 90 days horizon Strategic Education is expected to generate 3.0 times less return on investment than KB HOME. But when comparing it to its historical volatility, Strategic Education is 1.02 times less risky than KB HOME. It trades about 0.02 of its potential returns per unit of risk. KB HOME is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,154  in KB HOME on October 4, 2024 and sell it today you would earn a total of  3,046  from holding KB HOME or generate 96.58% return on investment over 90 days.

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

Strategic Education  vs.  KB HOME

Strategic Education

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education reported solid returns over the last few months and may actually be approaching a breakup point.

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Strategic Education and KB HOME

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

The idea behind Strategic Education and KB HOME 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.