Correlation Between Babcock International and Shimizu Corp
Can any of the company-specific risk be diversified away by investing in both Babcock International and Shimizu Corp 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 Shimizu Corp 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 Shimizu Corp ADR, you can compare the effects of market volatilities on Babcock International and Shimizu Corp 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 Shimizu Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock International and Shimizu Corp.
Diversification Opportunities for Babcock International and Shimizu Corp
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Babcock and Shimizu is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Babcock International Group and Shimizu Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimizu Corp ADR 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 Shimizu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimizu Corp ADR has no effect on the direction of Babcock International i.e., Babcock International and Shimizu Corp go up and down completely randomly.
Pair Corralation between Babcock International and Shimizu Corp
Assuming the 90 days horizon Babcock International is expected to generate 1.05 times less return on investment than Shimizu Corp. But when comparing it to its historical volatility, Babcock International Group is 1.62 times less risky than Shimizu Corp. It trades about 0.06 of its potential returns per unit of risk. Shimizu Corp ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,108 in Shimizu Corp ADR on September 3, 2024 and sell it today you would earn a total of 481.00 from holding Shimizu Corp ADR or generate 22.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 87.5% |
| Values | Daily Returns |
Babcock International Group vs. Shimizu Corp ADR
Performance |
| Timeline |
| Babcock International |
| Shimizu Corp ADR |
Babcock International and Shimizu Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock International and Shimizu Corp
The main advantage of trading using opposite Babcock International and Shimizu Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock International position performs unexpectedly, Shimizu Corp 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 Shimizu Corp will offset losses from the drop in Shimizu Corp's long position.| Babcock International vs. ACS Actividades De | Babcock International vs. Arcadis NV | Babcock International vs. Badger Infrastructure Solutions | Babcock International vs. Acciona SA |
| Shimizu Corp vs. Babcock International Group | Shimizu Corp vs. Metallurgical of | Shimizu Corp vs. China State Construction | Shimizu Corp vs. Babcock International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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