Correlation Between Babcock Wilcox and NL Industries
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and NL Industries 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 NL Industries 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 NL Industries, you can compare the effects of market volatilities on Babcock Wilcox and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and NL Industries.
Diversification Opportunities for Babcock Wilcox and NL Industries
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Babcock and NL Industries is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and NL Industries go up and down completely randomly.
Pair Corralation between Babcock Wilcox and NL Industries
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to generate 2.14 times more return on investment than NL Industries. However, Babcock Wilcox is 2.14 times more volatile than NL Industries. It trades about 0.05 of its potential returns per unit of risk. NL Industries is currently generating about 0.09 per unit of risk. If you would invest 142.00 in Babcock Wilcox Enterprises on August 26, 2024 and sell it today you would earn a total of 48.00 from holding Babcock Wilcox Enterprises or generate 33.8% 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. NL Industries
Performance |
| Timeline |
| Babcock Wilcox Enter |
| NL Industries |
Babcock Wilcox and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and NL Industries
The main advantage of trading using opposite Babcock Wilcox and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Hillenbrand | Babcock Wilcox vs. Ingersoll Rand |
| NL Industries vs. Park Electrochemical | NL Industries vs. Innovative Solutions and | NL Industries vs. Curtiss Wright | NL Industries vs. National Presto Industries |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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