Correlation Between Babcock Wilcox and Arq
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Arq 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 Arq 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 Arq Inc, you can compare the effects of market volatilities on Babcock Wilcox and Arq 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 Arq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Arq.
Diversification Opportunities for Babcock Wilcox and Arq
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Babcock and Arq is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Arq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arq Inc 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 Arq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arq Inc has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Arq go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Arq
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Arq. In addition to that, Babcock Wilcox is 1.65 times more volatile than Arq Inc. It trades about -0.17 of its total potential returns per unit of risk. Arq Inc is currently generating about -0.24 per unit of volatility. If you would invest 741.00 in Arq Inc on November 2, 2024 and sell it today you would lose (112.00) from holding Arq Inc or give up 15.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Arq Inc
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Arq Inc |
Babcock Wilcox and Arq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Arq
The main advantage of trading using opposite Babcock Wilcox and Arq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Arq 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 Arq will offset losses from the drop in Arq's long position.| Babcock Wilcox vs. Enerpac Tool Group | Babcock Wilcox vs. Gorman Rupp | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Franklin Electric Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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