Correlation Between KB Home and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both KB Home and Alibaba Group 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 Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB Home and Alibaba Group Holding, you can compare the effects of market volatilities on KB Home and Alibaba Group 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB Home and Alibaba Group.
Diversification Opportunities for KB Home and Alibaba Group
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KBH and Alibaba is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of KB Home i.e., KB Home and Alibaba Group go up and down completely randomly.
Pair Corralation between KB Home and Alibaba Group
Considering the 90-day investment horizon KB Home is expected to generate 23.4 times less return on investment than Alibaba Group. But when comparing it to its historical volatility, KB Home is 1.34 times less risky than Alibaba Group. It trades about 0.01 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 830,700 in Alibaba Group Holding on February 6, 2024 and sell it today you would earn a total of 192,350 from holding Alibaba Group Holding or generate 23.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 90.48% |
Values | Daily Returns |
KB Home vs. Alibaba Group Holding
Performance |
Timeline |
KB Home |
Alibaba Group Holding |
KB Home and Alibaba Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KB Home and Alibaba Group
The main advantage of trading using opposite KB Home and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB Home position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.KB Home vs. Api GroupCorp | KB Home vs. MYR Group | KB Home vs. Comfort Systems USA | KB Home vs. Construction Partners |
Alibaba Group vs. Harmony Gold Mining | Alibaba Group vs. United States Steel | Alibaba Group vs. Transportadora de Gas | Alibaba Group vs. Telecom Argentina |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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