Correlation Between MasTec and KBR

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

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

Diversification Opportunities for MasTec and KBR

0.78

Correlation Coefficient

MasTec  KBR

Poor diversification

The 3 months correlation between MasTec and KBR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MasTec Inc and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc and MasTec 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 MasTec Inc 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 MasTec i.e., MasTec and KBR go up and down completely randomly.

Pair Corralation between MasTec and KBR

Considering the 90-day investment horizon MasTec Inc is expected to generate 2.33 times more return on investment than KBR. However, MasTec is 2.33 times more volatile than KBR Inc. It trades about -0.03 of its potential returns per unit of risk. KBR Inc is currently generating about -0.1 per unit of risk. If you would invest  13,573  in MasTec Inc on December 27, 2024 and sell it today you would lose (1,301) from holding MasTec Inc or give up 9.59% of portfolio value over 90 days.

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

MasTec Inc  vs.  KBR Inc

MasTec Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days MasTec Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MasTec is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 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.

Pair Trading with MasTec and KBR

The main advantage of trading using opposite MasTec and KBR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MasTec 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 MasTec Inc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.