Correlation Between China State and Babcock International
Can any of the company-specific risk be diversified away by investing in both China State and Babcock International 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 China State and Babcock International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China State Construction and Babcock International Group, you can compare the effects of market volatilities on China State and Babcock International 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 China State with a short position of Babcock International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Babcock International.
Diversification Opportunities for China State and Babcock International
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Babcock is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Babcock International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock International and China State 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 China State Construction are associated (or correlated) with Babcock International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock International has no effect on the direction of China State i.e., China State and Babcock International go up and down completely randomly.
Pair Corralation between China State and Babcock International
Assuming the 90 days horizon China State Construction is expected to under-perform the Babcock International. In addition to that, China State is 2.73 times more volatile than Babcock International Group. It trades about -0.21 of its total potential returns per unit of risk. Babcock International Group is currently generating about 0.07 per unit of volatility. If you would invest 668.00 in Babcock International Group on August 31, 2024 and sell it today you would earn a total of 18.00 from holding Babcock International Group or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China State Construction vs. Babcock International Group
Performance |
| Timeline |
| China State Construction |
| Babcock International |
China State and Babcock International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China State and Babcock International
The main advantage of trading using opposite China State and Babcock International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China State position performs unexpectedly, Babcock International 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 Babcock International will offset losses from the drop in Babcock International's long position.| China State vs. Orion Group Holdings | China State vs. Agrify Corp | China State vs. Matrix Service Co | China State vs. MYR Group |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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