Correlation Between Babcock Wilcox and Innovate Corp
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Innovate Corp 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 Innovate Corp 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 Innovate Corp, you can compare the effects of market volatilities on Babcock Wilcox and Innovate Corp 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 Innovate Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Innovate Corp.
Diversification Opportunities for Babcock Wilcox and Innovate Corp
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Babcock and Innovate is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Innovate Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovate Corp 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 Innovate Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovate Corp has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Innovate Corp go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Innovate Corp
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Innovate Corp. But the stock apears to be less risky and, when comparing its historical volatility, Babcock Wilcox Enterprises is 3.95 times less risky than Innovate Corp. The stock trades about -0.09 of its potential returns per unit of risk. The Innovate Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 540.00 in Innovate Corp on November 9, 2024 and sell it today you would earn a total of 772.00 from holding Innovate Corp or generate 142.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Innovate Corp
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Innovate Corp |
Babcock Wilcox and Innovate Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Innovate Corp
The main advantage of trading using opposite Babcock Wilcox and Innovate Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Innovate Corp 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 Innovate Corp will offset losses from the drop in Innovate Corp'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 |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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