Correlation Between KB Home and Martin Marietta

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

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

Diversification Opportunities for KB Home and Martin Marietta

0.64

Correlation Coefficient

KB Home  Martin Marietta

Poor diversification

The 3 months correlation between KBH and Martin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding KB Home and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials 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 Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of KB Home i.e., KB Home and Martin Marietta go up and down completely randomly.

Pair Corralation between KB Home and Martin Marietta

Assuming the 90 days trading horizon KB Home is expected to generate 20.62 times less return on investment than Martin Marietta. But when comparing it to its historical volatility, KB Home is 32.41 times less risky than Martin Marietta. It trades about 0.13 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  981,692  in Martin Marietta Materials on April 22, 2025 and sell it today you would earn a total of  72,875  from holding Martin Marietta Materials or generate 7.42% return on investment over 90 days.

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

KB Home  vs.  Martin Marietta Materials

KB Home

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB Home are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, KB Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Martin Marietta Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Marietta Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Martin Marietta may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with KB Home and Martin Marietta

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

The idea behind KB Home and Martin Marietta Materials 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..