Correlation Between Comfort Systems and KBR

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

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

Diversification Opportunities for Comfort Systems and KBR

0.74

Correlation Coefficient

Comfort Systems  KBR

Poor diversification

The 3 months correlation between Comfort and KBR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc and Comfort Systems 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 Comfort Systems USA are associated (or correlated) with KBR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBR Inc has no effect on the direction of Comfort Systems i.e., Comfort Systems and KBR go up and down completely randomly.

Pair Corralation between Comfort Systems and KBR

Considering the 90-day investment horizon Comfort Systems USA is expected to under-perform the KBR. In addition to that, Comfort Systems is 2.83 times more volatile than KBR Inc. It trades about -0.09 of its total potential returns per unit of risk. KBR Inc is currently generating about -0.25 per unit of volatility. If you would invest  6,067  in KBR Inc on November 29, 2024 and sell it today you would lose (1,279) from holding KBR Inc or give up 21.08% of portfolio value over 90 days.

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

Comfort Systems USA  vs.  KBR Inc

Comfort Systems USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comfort Systems USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KBR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days KBR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with sluggish performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Comfort Systems and KBR

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

The idea behind Comfort Systems USA and KBR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.