Correlation Between Babcock Wilcox and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Automatic Data 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 Automatic Data 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 Automatic Data Processing, you can compare the effects of market volatilities on Babcock Wilcox and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Automatic Data.
Diversification Opportunities for Babcock Wilcox and Automatic Data
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Babcock and Automatic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Automatic Data go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Automatic Data
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Automatic Data. In addition to that, Babcock Wilcox is 5.64 times more volatile than Automatic Data Processing. It trades about -0.09 of its total potential returns per unit of risk. Automatic Data Processing is currently generating about 0.17 per unit of volatility. If you would invest 29,278 in Automatic Data Processing on August 31, 2024 and sell it today you would earn a total of 1,414 from holding Automatic Data Processing or generate 4.83% 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. Automatic Data Processing
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Automatic Data Processing |
Babcock Wilcox and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Automatic Data
The main advantage of trading using opposite Babcock Wilcox and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Babcock Wilcox vs. Standex International | Babcock Wilcox vs. Donaldson | Babcock Wilcox vs. CSW Industrials | Babcock Wilcox vs. Franklin Electric Co |
| Automatic Data vs. Robert Half International | Automatic Data vs. Barrett Business Services | Automatic Data vs. ManpowerGroup | Automatic Data vs. Kforce Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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