Correlation Between Aecom Technology and KBR

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

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

Diversification Opportunities for Aecom Technology and KBR

0.37

Correlation Coefficient

Aecom Technology  KBR

Weak diversification

The 3 months correlation between Aecom and KBR is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aecom Technology and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc and Aecom Technology 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 Aecom Technology 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 Aecom Technology i.e., Aecom Technology and KBR go up and down completely randomly.

Pair Corralation between Aecom Technology and KBR

Considering the 90-day investment horizon Aecom Technology is expected to generate 7.46 times less return on investment than KBR. In addition to that, Aecom Technology is 1.2 times more volatile than KBR Inc. It trades about 0.02 of its total potential returns per unit of risk. KBR Inc is currently generating about 0.21 per unit of volatility. If you would invest  5,913  in KBR Inc on February 22, 2024 and sell it today you would earn a total of  745.00  from holding KBR Inc or generate 12.6% return on investment over 90 days.

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

Aecom Technology  vs.  KBR Inc

Aecom Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aecom Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Aecom Technology is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

KBR Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KBR Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, KBR may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Aecom Technology and KBR

The main advantage of trading using opposite Aecom Technology and KBR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aecom Technology 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 Aecom Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.