Correlation Between Babcock Wilcox and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Babcock Wilcox and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Dow Jones.
Diversification Opportunities for Babcock Wilcox and Dow Jones
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Babcock and Dow is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Dow Jones go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Dow Jones
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Dow Jones. In addition to that, Babcock Wilcox is 7.46 times more volatile than Dow Jones Industrial. It trades about -0.14 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of volatility. If you would invest 4,238,757 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 234,900 from holding Dow Jones Industrial or generate 5.54% 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. Dow Jones Industrial
Performance |
| Timeline |
Babcock Wilcox and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Babcock Wilcox Enterprises
Pair trading matchups for Babcock Wilcox
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Babcock Wilcox and Dow Jones
The main advantage of trading using opposite Babcock Wilcox and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Hillenbrand | Babcock Wilcox vs. Ingersoll Rand |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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