Correlation Between Babcock Wilcox and Trinity Industries
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Trinity 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 Trinity 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 Trinity Industries, you can compare the effects of market volatilities on Babcock Wilcox and Trinity 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 Trinity Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Trinity Industries.
Diversification Opportunities for Babcock Wilcox and Trinity Industries
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Babcock and Trinity is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Trinity Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity 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 Trinity Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Industries has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Trinity Industries go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Trinity Industries
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Trinity Industries. In addition to that, Babcock Wilcox is 2.86 times more volatile than Trinity Industries. It trades about -0.12 of its total potential returns per unit of risk. Trinity Industries is currently generating about 0.16 per unit of volatility. If you would invest 3,232 in Trinity Industries on November 1, 2024 and sell it today you would earn a total of 628.50 from holding Trinity Industries or generate 19.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Trinity Industries
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Trinity Industries |
Babcock Wilcox and Trinity Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Trinity Industries
The main advantage of trading using opposite Babcock Wilcox and Trinity Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Trinity 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 Trinity Industries will offset losses from the drop in Trinity Industries' long position.| Babcock Wilcox vs. Enerpac Tool Group | Babcock Wilcox vs. Gorman Rupp | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Franklin Electric Co |
| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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