Correlation Between Dycom Industries and Kforce

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

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

Diversification Opportunities for Dycom Industries and Kforce

0.53

Correlation Coefficient

Dycom Industries  Kforce

Very weak diversification

The 3 months correlation between Dycom and Kforce is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dycom Industries and Kforce Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kforce Inc and Dycom Industries 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 Dycom Industries are associated (or correlated) with Kforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kforce Inc has no effect on the direction of Dycom Industries i.e., Dycom Industries and Kforce go up and down completely randomly.

Pair Corralation between Dycom Industries and Kforce

Allowing for the 90-day total investment horizon Dycom Industries is expected to generate 1.75 times more return on investment than Kforce. However, Dycom Industries is 1.75 times more volatile than Kforce Inc. It trades about -0.06 of its potential returns per unit of risk. Kforce Inc is currently generating about -0.12 per unit of risk. If you would invest  17,478  in Dycom Industries on December 28, 2024 and sell it today you would lose (2,064) from holding Dycom Industries or give up 11.81% of portfolio value over 90 days.

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

Dycom Industries  vs.  Kforce Inc

Dycom Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dycom Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kforce Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Dycom Industries and Kforce

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

The idea behind Dycom Industries and Kforce Inc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.