Correlation Between Babcock Wilcox and XOMA
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and XOMA 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 XOMA 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 XOMA Corporation, you can compare the effects of market volatilities on Babcock Wilcox and XOMA 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 XOMA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and XOMA.
Diversification Opportunities for Babcock Wilcox and XOMA
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Babcock and XOMA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA 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 XOMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and XOMA go up and down completely randomly.
Pair Corralation between Babcock Wilcox and XOMA
Assuming the 90 days horizon Babcock Wilcox Enterprises is expected to under-perform the XOMA. In addition to that, Babcock Wilcox is 15.49 times more volatile than XOMA Corporation. It trades about -0.21 of its total potential returns per unit of risk. XOMA Corporation is currently generating about -0.36 per unit of volatility. If you would invest 2,564 in XOMA Corporation on August 24, 2024 and sell it today you would lose (31.00) from holding XOMA Corporation or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. XOMA Corp.
Performance |
| Timeline |
| Babcock Wilcox Enter |
| XOMA |
Babcock Wilcox and XOMA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and XOMA
The main advantage of trading using opposite Babcock Wilcox and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, XOMA 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 XOMA will offset losses from the drop in XOMA'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 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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