Correlation Between KB HOME and BURLINGTON STORES

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

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

Diversification Opportunities for KB HOME and BURLINGTON STORES

0.76

Correlation Coefficient

KB HOME  BURLINGTON STORES

Poor diversification

The 3 months correlation between KBH and BURLINGTON is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding KB HOME and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES 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 BURLINGTON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BURLINGTON STORES has no effect on the direction of KB HOME i.e., KB HOME and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between KB HOME and BURLINGTON STORES

Assuming the 90 days trading horizon KB HOME is expected to generate 1.17 times more return on investment than BURLINGTON STORES. However, KB HOME is 1.17 times more volatile than BURLINGTON STORES. It trades about 0.03 of its potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.02 per unit of risk. If you would invest  4,819  in KB HOME on May 15, 2025 and sell it today you would earn a total of  161.00  from holding KB HOME or generate 3.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

KB HOME  vs.  BURLINGTON STORES

KB HOME

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KB HOME are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

BURLINGTON STORES

Risk-Adjusted Performance

Weakest

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, BURLINGTON STORES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KB HOME and BURLINGTON STORES

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

The idea behind KB HOME and BURLINGTON STORES 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.