Correlation Between Babcock Wilcox and ITT
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and ITT 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 ITT 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 ITT Inc, you can compare the effects of market volatilities on Babcock Wilcox and ITT 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 ITT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and ITT.
Diversification Opportunities for Babcock Wilcox and ITT
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Babcock and ITT is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and ITT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITT 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 ITT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITT Inc has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and ITT go up and down completely randomly.
Pair Corralation between Babcock Wilcox and ITT
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the ITT. In addition to that, Babcock Wilcox is 3.2 times more volatile than ITT Inc. It trades about -0.21 of its total potential returns per unit of risk. ITT Inc is currently generating about -0.07 per unit of volatility. If you would invest 15,118 in ITT Inc on November 18, 2024 and sell it today you would lose (360.00) from holding ITT Inc or give up 2.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. ITT Inc
Performance |
| Timeline |
| Babcock Wilcox Enter |
| ITT Inc |
Babcock Wilcox and ITT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and ITT
The main advantage of trading using opposite Babcock Wilcox and ITT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, ITT 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 ITT will offset losses from the drop in ITT'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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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