Correlation Between Argan and KBR
Can any of the company-specific risk be diversified away by investing in both Argan 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 Argan and KBR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Argan Inc and KBR Inc, you can compare the effects of market volatilities on Argan 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 Argan with a short position of KBR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argan and KBR.
Diversification Opportunities for Argan and KBR
Average diversification
The 3 months correlation between Argan and KBR is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc and Argan 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 Argan 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 Argan i.e., Argan and KBR go up and down completely randomly.
Pair Corralation between Argan and KBR
Considering the 90-day investment horizon Argan Inc is expected to generate 1.15 times more return on investment than KBR. However, Argan is 1.15 times more volatile than KBR Inc. It trades about 0.25 of its potential returns per unit of risk. KBR Inc is currently generating about -0.1 per unit of risk. If you would invest 13,120 in Argan Inc on August 27, 2024 and sell it today you would earn a total of 2,743 from holding Argan Inc or generate 20.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Argan Inc vs. KBR Inc
Performance |
| Timeline |
| Argan Inc |
| KBR Inc |
Argan and KBR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Argan and KBR
The main advantage of trading using opposite Argan and KBR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan 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 Argan 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.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Stocks Directory Find actively traded stocks across global markets | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |