Correlation Between Babcock Wilcox and CompoSecure
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and CompoSecure 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 CompoSecure 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 CompoSecure, you can compare the effects of market volatilities on Babcock Wilcox and CompoSecure 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 CompoSecure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and CompoSecure.
Diversification Opportunities for Babcock Wilcox and CompoSecure
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Babcock and CompoSecure is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and CompoSecure go up and down completely randomly.
Pair Corralation between Babcock Wilcox and CompoSecure
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the CompoSecure. In addition to that, Babcock Wilcox is 2.27 times more volatile than CompoSecure. It trades about -0.14 of its total potential returns per unit of risk. CompoSecure is currently generating about 0.06 per unit of volatility. If you would invest 1,557 in CompoSecure on August 27, 2024 and sell it today you would earn a total of 47.00 from holding CompoSecure or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. CompoSecure
Performance |
| Timeline |
| Babcock Wilcox Enter |
| CompoSecure |
Babcock Wilcox and CompoSecure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and CompoSecure
The main advantage of trading using opposite Babcock Wilcox and CompoSecure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, CompoSecure 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 CompoSecure will offset losses from the drop in CompoSecure's long position.| Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Hillenbrand | Babcock Wilcox vs. Ingersoll Rand |
| CompoSecure vs. Northwest Pipe | CompoSecure vs. Insteel Industries | CompoSecure vs. Carpenter Technology | CompoSecure vs. ESAB Corp |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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