Correlation Between Babcock Wilcox and Capital One
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Capital One 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 Wilcox and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Babcock Wilcox Enterprises and Capital One Financial, you can compare the effects of market volatilities on Babcock Wilcox and Capital One 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 Wilcox with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Capital One.
Diversification Opportunities for Babcock Wilcox and Capital One
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Babcock and Capital is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Babcock Wilcox 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 Wilcox Enterprises are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Capital One go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Capital One
Assuming the 90 days horizon Babcock Wilcox Enterprises is expected to generate 2.75 times more return on investment than Capital One. However, Babcock Wilcox is 2.75 times more volatile than Capital One Financial. It trades about 0.04 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.04 per unit of risk. If you would invest 1,061 in Babcock Wilcox Enterprises on September 12, 2024 and sell it today you would earn a total of 382.00 from holding Babcock Wilcox Enterprises or generate 36.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Capital One Financial
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Capital One Financial |
Babcock Wilcox and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Capital One
The main advantage of trading using opposite Babcock Wilcox and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Babcock Wilcox vs. Atlanticus Holdings Corp | Babcock Wilcox vs. Costamare | Babcock Wilcox vs. Alta Equipment Group | Babcock Wilcox vs. Global Ship Lease |
| Capital One vs. Babcock Wilcox Enterprises | Capital One vs. XOMA Corporation | Capital One vs. Brighthouse Financial | Capital One vs. Presidio Property Trust |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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