Correlation Between KBR and Dycom Industries

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

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

Diversification Opportunities for KBR and Dycom Industries

0.63

Correlation Coefficient

KBR  Dycom Industries

Poor diversification

The 3 months correlation between KBR and Dycom is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding KBR Inc and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries and KBR 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 KBR Inc are associated (or correlated) with Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of KBR i.e., KBR and Dycom Industries go up and down completely randomly.

Pair Corralation between KBR and Dycom Industries

Considering the 90-day investment horizon KBR Inc is expected to under-perform the Dycom Industries. But the stock apears to be less risky and, when comparing its historical volatility, KBR Inc is 1.73 times less risky than Dycom Industries. The stock trades about -0.11 of its potential returns per unit of risk. The Dycom Industries is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  17,832  in Dycom Industries on December 26, 2024 and sell it today you would lose (1,709) from holding Dycom Industries or give up 9.58% of portfolio value over 90 days.

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

KBR Inc  vs.  Dycom Industries

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 latest sluggish performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 unsteady 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.

Pair Trading with KBR and Dycom Industries

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

The idea behind KBR Inc and Dycom Industries 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.