Correlation Between BrightView Holdings and KBR

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

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

Diversification Opportunities for BrightView Holdings and KBR

0.78

Correlation Coefficient

BrightView Holdings  KBR

Poor diversification

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

Pair Corralation between BrightView Holdings and KBR

Allowing for the 90-day total investment horizon BrightView Holdings is expected to generate 2.8 times more return on investment than KBR. However, BrightView Holdings is 2.8 times more volatile than KBR Inc. It trades about 0.3 of its potential returns per unit of risk. KBR Inc is currently generating about 0.18 per unit of risk. If you would invest  856.00  in BrightView Holdings on February 23, 2024 and sell it today you would earn a total of  519.00  from holding BrightView Holdings or generate 60.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

BrightView Holdings  vs.  KBR Inc

BrightView Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BrightView Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

KBR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KBR Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish fundamental drivers, KBR may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BrightView Holdings and KBR

The main advantage of trading using opposite BrightView Holdings and KBR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrightView Holdings 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 BrightView Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.