Correlation Between Babcock International and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Babcock International and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Babcock International and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock International and Dow Jones.
Diversification Opportunities for Babcock International and Dow Jones
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Babcock and Dow is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Babcock International Group and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Babcock International i.e., Babcock International and Dow Jones go up and down completely randomly.
Pair Corralation between Babcock International and Dow Jones
Assuming the 90 days horizon Babcock International Group is expected to generate 4.07 times more return on investment than Dow Jones. However, Babcock International is 4.07 times more volatile than Dow Jones Industrial. It trades about 0.14 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 594.00 in Babcock International Group on August 28, 2024 and sell it today you would earn a total of 64.00 from holding Babcock International Group or generate 10.77% 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. Dow Jones Industrial
Performance |
| Timeline |
Babcock International and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Babcock International Group
Pair trading matchups for Babcock International
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Babcock International and Dow Jones
The main advantage of trading using opposite Babcock International and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock International position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Babcock International vs. ACS Actividades De | Babcock International vs. Arcadis NV | Babcock International vs. Badger Infrastructure Solutions | Babcock International vs. Acciona SA |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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