Correlation Between KB Home and Topbuild Corp

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

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

Diversification Opportunities for KB Home and Topbuild Corp

0.84

Correlation Coefficient

KB Home  Topbuild Corp

Very poor diversification

The 3 months correlation between KBH and Topbuild is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp 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 Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of KB Home i.e., KB Home and Topbuild Corp go up and down completely randomly.

Pair Corralation between KB Home and Topbuild Corp

Considering the 90-day investment horizon KB Home is expected to generate 3.72 times less return on investment than Topbuild Corp. But when comparing it to its historical volatility, KB Home is 1.02 times less risky than Topbuild Corp. It trades about 0.05 of its potential returns per unit of risk. Topbuild Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  31,210  in Topbuild Corp on May 12, 2025 and sell it today you would earn a total of  10,331  from holding Topbuild Corp or generate 33.1% return on investment over 90 days.

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

KB Home  vs.  Topbuild Corp

KB Home

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in KB Home are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, KB Home may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Topbuild Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Topbuild Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Topbuild Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KB Home and Topbuild Corp

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

The idea behind KB Home and Topbuild Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..