Correlation Between Tetra Tech and KBR

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

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

Diversification Opportunities for Tetra Tech and KBR

0.94

Correlation Coefficient

Tetra Tech  KBR

Almost no diversification

The 3 months correlation between Tetra and KBR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Tetra Tech and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc and Tetra Tech 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 Tetra Tech 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 Tetra Tech i.e., Tetra Tech and KBR go up and down completely randomly.

Pair Corralation between Tetra Tech and KBR

Given the investment horizon of 90 days Tetra Tech is expected to under-perform the KBR. In addition to that, Tetra Tech is 1.21 times more volatile than KBR Inc. It trades about -0.25 of its total potential returns per unit of risk. KBR Inc is currently generating about -0.1 per unit of volatility. If you would invest  5,686  in KBR Inc on December 27, 2024 and sell it today you would lose (588.00) from holding KBR Inc or give up 10.34% of portfolio value over 90 days.

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

Tetra Tech  vs.  KBR Inc

Tetra Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tetra Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 Tetra Tech and KBR

The main advantage of trading using opposite Tetra Tech and KBR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetra Tech 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 Tetra Tech 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.