Correlation Between Babcock International and NWS Holdings
Can any of the company-specific risk be diversified away by investing in both Babcock International and NWS Holdings 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 NWS Holdings 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 NWS Holdings Limited, you can compare the effects of market volatilities on Babcock International and NWS Holdings 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 NWS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock International and NWS Holdings.
Diversification Opportunities for Babcock International and NWS Holdings
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Babcock and NWS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Babcock International Group and NWS Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWS Holdings Limited 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 NWS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWS Holdings Limited has no effect on the direction of Babcock International i.e., Babcock International and NWS Holdings go up and down completely randomly.
Pair Corralation between Babcock International and NWS Holdings
Assuming the 90 days horizon Babcock International is expected to generate 15.75 times less return on investment than NWS Holdings. But when comparing it to its historical volatility, Babcock International Group is 1.91 times less risky than NWS Holdings. It trades about 0.01 of its potential returns per unit of risk. NWS Holdings Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 60.00 in NWS Holdings Limited on September 1, 2024 and sell it today you would earn a total of 43.00 from holding NWS Holdings Limited or generate 71.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.95% |
| Values | Daily Returns |
Babcock International Group vs. NWS Holdings Limited
Performance |
| Timeline |
| Babcock International |
| NWS Holdings Limited |
Babcock International and NWS Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock International and NWS Holdings
The main advantage of trading using opposite Babcock International and NWS Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock International position performs unexpectedly, NWS Holdings 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 NWS Holdings will offset losses from the drop in NWS Holdings' long position.| Babcock International vs. Orion Group Holdings | Babcock International vs. Agrify Corp | Babcock International vs. Matrix Service Co | Babcock International vs. MYR Group |
| NWS Holdings vs. Babcock International Group | NWS Holdings vs. Tcnicas Reunidas SA | NWS Holdings vs. Shimizu Corp ADR | NWS Holdings vs. Obayashi |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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