Correlation Between Babcock Wilcox and Generac Holdings
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Generac Holdings 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 Generac Holdings 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 Generac Holdings, you can compare the effects of market volatilities on Babcock Wilcox and Generac Holdings 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 Generac Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Generac Holdings.
Diversification Opportunities for Babcock Wilcox and Generac Holdings
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Babcock and Generac is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings 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 Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Generac Holdings go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Generac Holdings
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Generac Holdings. In addition to that, Babcock Wilcox is 3.58 times more volatile than Generac Holdings. It trades about -0.14 of its total potential returns per unit of risk. Generac Holdings is currently generating about 0.32 per unit of volatility. If you would invest 16,565 in Generac Holdings on August 27, 2024 and sell it today you would earn a total of 2,343 from holding Generac Holdings or generate 14.14% 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. Generac Holdings
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Generac Holdings |
Babcock Wilcox and Generac Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Generac Holdings
The main advantage of trading using opposite Babcock Wilcox and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Generac Holdings 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 Generac Holdings will offset losses from the drop in Generac Holdings' long position.| Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Hillenbrand | Babcock Wilcox vs. Ingersoll Rand |
| Generac Holdings vs. Graco Inc | Generac Holdings vs. Franklin Electric Co | Generac Holdings vs. Flowserve | Generac Holdings vs. Donaldson |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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