Correlation Between KBR and Comfort Systems

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

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

Diversification Opportunities for KBR and Comfort Systems

-0.01

Correlation Coefficient

KBR  Comfort Systems

Good diversification

The 3 months correlation between KBR and Comfort is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding KBR Inc and Comfort Systems USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comfort Systems USA 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 Comfort Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comfort Systems USA has no effect on the direction of KBR i.e., KBR and Comfort Systems go up and down completely randomly.

Pair Corralation between KBR and Comfort Systems

Considering the 90-day investment horizon KBR Inc is expected to under-perform the Comfort Systems. But the stock apears to be less risky and, when comparing its historical volatility, KBR Inc is 1.07 times less risky than Comfort Systems. The stock trades about -0.05 of its potential returns per unit of risk. The Comfort Systems USA is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  31,457  in Comfort Systems USA on August 31, 2024 and sell it today you would earn a total of  17,208  from holding Comfort Systems USA or generate 54.7% return on investment over 90 days.

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

KBR Inc  vs.  Comfort Systems USA

KBR Inc

Risk-Adjusted Performance

0 of 100

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.

Comfort Systems USA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Comfort Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBR and Comfort Systems

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

The idea behind KBR Inc and Comfort Systems USA 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 .