Correlation Between Fluor and MasTec

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

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

Diversification Opportunities for Fluor and MasTec

0.73

Correlation Coefficient

Fluor  MasTec

Poor diversification

The 3 months correlation between Fluor and MasTec is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Fluor and MasTec Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MasTec Inc and Fluor 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 Fluor are associated (or correlated) with MasTec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MasTec Inc has no effect on the direction of Fluor i.e., Fluor and MasTec go up and down completely randomly.

Pair Corralation between Fluor and MasTec

Considering the 90-day investment horizon Fluor is expected to generate 1.4 times less return on investment than MasTec. In addition to that, Fluor is 2.07 times more volatile than MasTec Inc. It trades about 0.06 of its total potential returns per unit of risk. MasTec Inc is currently generating about 0.18 per unit of volatility. If you would invest  13,261  in MasTec Inc on September 4, 2024 and sell it today you would earn a total of  944.00  from holding MasTec Inc or generate 7.12% return on investment over 90 days.

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

Fluor  vs.  MasTec Inc

Fluor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fluor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, Fluor reported solid returns over the last few months and may actually be approaching a breakup point.

MasTec Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MasTec Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MasTec showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fluor and MasTec

The main advantage of trading using opposite Fluor and MasTec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluor position performs unexpectedly, MasTec 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 MasTec will offset losses from the drop in MasTec's long position.

The idea behind Fluor and MasTec 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.