Correlation Between Babcock Wilcox and Nordson
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Nordson 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 Nordson 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 Nordson, you can compare the effects of market volatilities on Babcock Wilcox and Nordson 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 Nordson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Nordson.
Diversification Opportunities for Babcock Wilcox and Nordson
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Babcock and Nordson is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson 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 Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Nordson go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Nordson
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Nordson. In addition to that, Babcock Wilcox is 2.81 times more volatile than Nordson. It trades about -0.28 of its total potential returns per unit of risk. Nordson is currently generating about -0.32 per unit of volatility. If you would invest 22,320 in Nordson on October 16, 2024 and sell it today you would lose (1,937) from holding Nordson or give up 8.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Nordson
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Nordson |
Babcock Wilcox and Nordson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Nordson
The main advantage of trading using opposite Babcock Wilcox and Nordson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Nordson 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 Nordson will offset losses from the drop in Nordson'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 |
| Nordson vs. Illinois Tool Works | Nordson vs. Pentair PLC | Nordson vs. Parker Hannifin | Nordson vs. Emerson Electric |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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