Correlation Between Babcock Wilcox and Stepan
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Babcock Wilcox and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Stepan.
Diversification Opportunities for Babcock Wilcox and Stepan
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Babcock and Stepan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Stepan go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Stepan
Given the investment horizon of 90 days Babcock Wilcox Enterprises is expected to generate 0.89 times more return on investment than Stepan. However, Babcock Wilcox Enterprises is 1.13 times less risky than Stepan. It trades about -0.03 of its potential returns per unit of risk. Stepan Company is currently generating about -0.09 per unit of risk. If you would invest 2,145 in Babcock Wilcox Enterprises on September 14, 2024 and sell it today you would lose (15.00) from holding Babcock Wilcox Enterprises or give up 0.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Stepan Company
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Stepan Company |
Babcock Wilcox and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Stepan
The main advantage of trading using opposite Babcock Wilcox and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Babcock Wilcox vs. Harmony Gold Mining | Babcock Wilcox vs. Insteel Industries | Babcock Wilcox vs. Coupang LLC | Babcock Wilcox vs. Getty Realty |
| Stepan vs. LyondellBasell Industries NV | Stepan vs. Cabot | Stepan vs. Westlake Chemical | Stepan vs. Air Products and |
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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