Correlation Between KBR and Tetra Tech
Can any of the company-specific risk be diversified away by investing in both KBR and Tetra Tech 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 Tetra Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KBR Inc and Tetra Tech, you can compare the effects of market volatilities on KBR and Tetra Tech 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 Tetra Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBR and Tetra Tech.
Diversification Opportunities for KBR and Tetra Tech
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between KBR and Tetra is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding KBR Inc and Tetra Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra Tech 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 Tetra Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetra Tech has no effect on the direction of KBR i.e., KBR and Tetra Tech go up and down completely randomly.
Pair Corralation between KBR and Tetra Tech
Considering the 90-day investment horizon KBR is expected to generate 1.59 times less return on investment than Tetra Tech. In addition to that, KBR is 1.01 times more volatile than Tetra Tech. It trades about 0.18 of its total potential returns per unit of risk. Tetra Tech is currently generating about 0.28 per unit of volatility. If you would invest 4,030 in Tetra Tech on October 20, 2024 and sell it today you would earn a total of 228.00 from holding Tetra Tech or generate 5.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KBR Inc vs. Tetra Tech
Performance |
| Timeline |
| KBR Inc |
| Tetra Tech |
KBR and Tetra Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KBR and Tetra Tech
The main advantage of trading using opposite KBR and Tetra Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBR position performs unexpectedly, Tetra Tech 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 Tetra Tech will offset losses from the drop in Tetra Tech's long position.The idea behind KBR Inc and Tetra Tech 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.| Tetra Tech vs. Jacobs Solutions | Tetra Tech vs. KBR Inc | Tetra Tech vs. Fluor | Tetra Tech vs. Topbuild Corp |
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.
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