Correlation Between KBR and MasTec

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

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

Diversification Opportunities for KBR and MasTec

0.05

Correlation Coefficient

KBR  MasTec

Significant diversification

The 3 months correlation between KBR and MasTec is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding KBR Inc and MasTec Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasTec Inc 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 MasTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasTec Inc has no effect on the direction of KBR i.e., KBR and MasTec go up and down completely randomly.

Pair Corralation between KBR and MasTec

Considering the 90-day investment horizon KBR Inc is expected to under-perform the MasTec. In addition to that, KBR is 1.55 times more volatile than MasTec Inc. It trades about -0.13 of its total potential returns per unit of risk. MasTec Inc is currently generating about 0.4 per unit of volatility. If you would invest  12,000  in MasTec Inc on August 31, 2024 and sell it today you would earn a total of  2,455  from holding MasTec Inc or generate 20.46% return on investment over 90 days.

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

KBR Inc  vs.  MasTec Inc

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.

MasTec Inc

Risk-Adjusted Performance

20 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MasTec Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MasTec showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBR and MasTec

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

The idea behind KBR Inc and MasTec 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.