Correlation Between KBR and Great Lakes

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

By analyzing existing cross correlation between KBR Inc and Great Lakes Dredge, you can compare the effects of market volatilities on KBR and Great Lakes 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 Great Lakes. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBR and Great Lakes.

Diversification Opportunities for KBR and Great Lakes

0.25

Correlation Coefficient

KBR  Great Lakes

Modest diversification

The 3 months correlation between KBR and Great is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding KBR Inc and Great Lakes Dredge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Lakes Dredge 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 Great Lakes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Lakes Dredge has no effect on the direction of KBR i.e., KBR and Great Lakes go up and down completely randomly.

Pair Corralation between KBR and Great Lakes

Considering the 90-day investment horizon KBR Inc is expected to under-perform the Great Lakes. In addition to that, KBR is 1.11 times more volatile than Great Lakes Dredge. It trades about -0.07 of its total potential returns per unit of risk. Great Lakes Dredge is currently generating about 0.18 per unit of volatility. If you would invest  995.00  in Great Lakes Dredge on August 30, 2024 and sell it today you would earn a total of  257.00  from holding Great Lakes Dredge or generate 25.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

KBR Inc  vs.  Great Lakes Dredge

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.

Great Lakes Dredge

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Lakes Dredge are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Great Lakes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBR and Great Lakes

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

The idea behind KBR Inc and Great Lakes Dredge 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.