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
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
Performance |
Timeline |
KBR Inc |
MasTec Inc |
KBR and MasTec Volatility Contrast
Predicted Return Density |
Returns |
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.MasTec vs. EMCOR Group | MasTec vs. Comfort Systems USA | MasTec vs. Primoris Services | MasTec vs. Granite Construction Incorporated |
Check out your portfolio center.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.
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