Correlation Between Meritage and KB Home

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

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

Diversification Opportunities for Meritage and KB Home

0.79

Correlation Coefficient

Meritage  KB Home

Poor diversification

The 3 months correlation between Meritage and KBH is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Meritage and KB Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Home and Meritage 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 Meritage 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 Meritage i.e., Meritage and KB Home go up and down completely randomly.

Pair Corralation between Meritage and KB Home

Considering the 90-day investment horizon Meritage is expected to generate 5.18 times less return on investment than KB Home. In addition to that, Meritage is 1.04 times more volatile than KB Home. It trades about 0.02 of its total potential returns per unit of risk. KB Home is currently generating about 0.1 per unit of volatility. If you would invest  5,631  in KB Home on July 24, 2025 and sell it today you would earn a total of  714.00  from holding KB Home or generate 12.68% return on investment over 90 days.

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

Meritage  vs.  KB Home

Meritage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Meritage are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Meritage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

KB Home

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in KB Home are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental drivers, KB Home demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meritage and KB Home

The main advantage of trading using opposite Meritage and KB Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meritage 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 Meritage 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .