Correlation Between CARSALESCOM and Kaufman Broad

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

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

Diversification Opportunities for CARSALESCOM and Kaufman Broad

-0.36

Correlation Coefficient

CARSALESCOM  Kaufman Broad

Very good diversification

The 3 months correlation between CARSALESCOM and Kaufman is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM i.e., CARSALESCOM and Kaufman Broad go up and down completely randomly.

Pair Corralation between CARSALESCOM and Kaufman Broad

Assuming the 90 days trading horizon CARSALESCOM is expected to under-perform the Kaufman Broad. But the stock apears to be less risky and, when comparing its historical volatility, CARSALESCOM is 1.04 times less risky than Kaufman Broad. The stock trades about -0.39 of its potential returns per unit of risk. The Kaufman Broad SA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,205  in Kaufman Broad SA on September 22, 2024 and sell it today you would lose (35.00) from holding Kaufman Broad SA or give up 1.09% of portfolio value over 90 days.

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

CARSALESCOM  vs.  Kaufman Broad SA

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Kaufman Broad SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaufman Broad SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kaufman Broad is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CARSALESCOM and Kaufman Broad

The main advantage of trading using opposite CARSALESCOM and Kaufman Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALESCOM 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 CARSALESCOM 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.