Correlation Between Babcock International and China State
Can any of the company-specific risk be diversified away by investing in both Babcock International and China State 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 Babcock International and China State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Babcock International Group and China State Construction, you can compare the effects of market volatilities on Babcock International and China State 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 Babcock International with a short position of China State. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock International and China State.
Diversification Opportunities for Babcock International and China State
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Babcock and China is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Babcock International Group and China State Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China State Construction and Babcock International 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 Babcock International Group are associated (or correlated) with China State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China State Construction has no effect on the direction of Babcock International i.e., Babcock International and China State go up and down completely randomly.
Pair Corralation between Babcock International and China State
Assuming the 90 days horizon Babcock International Group is expected to generate 0.67 times more return on investment than China State. However, Babcock International Group is 1.49 times less risky than China State. It trades about 0.13 of its potential returns per unit of risk. China State Construction is currently generating about -0.21 per unit of risk. If you would invest 595.00 in Babcock International Group on August 31, 2024 and sell it today you would earn a total of 63.00 from holding Babcock International Group or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock International Group vs. China State Construction
Performance |
| Timeline |
| Babcock International |
| China State Construction |
Babcock International and China State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock International and China State
The main advantage of trading using opposite Babcock International and China State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock International position performs unexpectedly, China State 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 China State will offset losses from the drop in China State's long position.| Babcock International vs. Orion Group Holdings | Babcock International vs. Agrify Corp | Babcock International vs. Matrix Service Co | Babcock International vs. MYR Group |
| China State vs. Orion Group Holdings | China State vs. Agrify Corp | China State vs. Matrix Service Co | China State vs. MYR Group |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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