Correlation Between KBR and WSP Global

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

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

Diversification Opportunities for KBR and WSP Global

0.56

Correlation Coefficient

KBR  WSP Global

Very weak diversification

The 3 months correlation between KBR and WSP is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding KBR Inc and WSP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WSP Global 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 WSP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WSP Global has no effect on the direction of KBR i.e., KBR and WSP Global go up and down completely randomly.

Pair Corralation between KBR and WSP Global

Considering the 90-day investment horizon KBR Inc is expected to under-perform the WSP Global. In addition to that, KBR is 2.34 times more volatile than WSP Global. It trades about -0.02 of its total potential returns per unit of risk. WSP Global is currently generating about 0.08 per unit of volatility. If you would invest  17,004  in WSP Global on September 13, 2024 and sell it today you would earn a total of  777.00  from holding WSP Global or generate 4.57% return on investment over 90 days.

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

KBR Inc  vs.  WSP Global

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 relatively invariable fundamental drivers, KBR is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

WSP Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WSP Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, WSP Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KBR and WSP Global

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

The idea behind KBR Inc and WSP Global 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.