Correlation Between Reliant Holdings and KBR

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

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

Diversification Opportunities for Reliant Holdings and KBR

0.29

Correlation Coefficient

Reliant Holdings  KBR

Modest diversification

The 3 months correlation between Reliant and KBR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Reliant Holdings and KBR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBR Inc and Reliant 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 Reliant 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 Reliant Holdings i.e., Reliant Holdings and KBR go up and down completely randomly.

Pair Corralation between Reliant Holdings and KBR

Given the investment horizon of 90 days Reliant Holdings is expected to generate 8.52 times more return on investment than KBR. However, Reliant Holdings is 8.52 times more volatile than KBR Inc. It trades about 0.02 of its potential returns per unit of risk. KBR Inc is currently generating about -0.1 per unit of risk. If you would invest  10.00  in Reliant Holdings on August 27, 2024 and sell it today you would lose (4.89) from holding Reliant Holdings or give up 48.9% of portfolio value over 90 days.

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

Reliant Holdings  vs.  KBR Inc

Reliant Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliant Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Reliant Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

KBR Inc

Risk-Adjusted Performance

0 of 100

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 Reliant Holdings and KBR

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