Correlation Between Corporate Office and KB HOME

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

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

Diversification Opportunities for Corporate Office and KB HOME

0.13

Correlation Coefficient

Corporate Office  KB HOME

Average diversification

The 3 months correlation between Corporate and KBH is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME and Corporate Office 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 Corporate Office Properties 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 Corporate Office i.e., Corporate Office and KB HOME go up and down completely randomly.

Pair Corralation between Corporate Office and KB HOME

Assuming the 90 days horizon Corporate Office Properties is expected to generate 0.52 times more return on investment than KB HOME. However, Corporate Office Properties is 1.93 times less risky than KB HOME. It trades about 0.23 of its potential returns per unit of risk. KB HOME is currently generating about 0.02 per unit of risk. If you would invest  2,631  in Corporate Office Properties on September 12, 2024 and sell it today you would earn a total of  489.00  from holding Corporate Office Properties or generate 18.59% return on investment over 90 days.

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

Corporate Office Properties  vs.  KB HOME

Corporate Office Pro

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Office Properties are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corporate Office reported solid returns over the last few months and may actually be approaching a breakup point.

KB HOME

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KB HOME are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, KB HOME is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Corporate Office and KB HOME

The main advantage of trading using opposite Corporate Office and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.