Correlation Between Crane and Babcock Wilcox
Can any of the company-specific risk be diversified away by investing in both Crane and Babcock Wilcox 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 Crane and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Crane and Babcock Wilcox 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 Crane with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Babcock Wilcox.
Diversification Opportunities for Crane and Babcock Wilcox
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Crane and Babcock is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company and Babcock Wilcox Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter and Crane 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 Crane Company are associated (or correlated) with Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of Crane i.e., Crane and Babcock Wilcox go up and down completely randomly.
Pair Corralation between Crane and Babcock Wilcox
Allowing for the 90-day total investment horizon Crane is expected to generate 1.18 times less return on investment than Babcock Wilcox. But when comparing it to its historical volatility, Crane Company is 3.55 times less risky than Babcock Wilcox. It trades about 0.13 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 167.00 in Babcock Wilcox Enterprises on August 27, 2024 and sell it today you would earn a total of 23.00 from holding Babcock Wilcox Enterprises or generate 13.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crane Company vs. Babcock Wilcox Enterprises
Performance |
| Timeline |
| Crane Company |
| Babcock Wilcox Enter |
Crane and Babcock Wilcox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Babcock Wilcox
The main advantage of trading using opposite Crane and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane position performs unexpectedly, Babcock Wilcox 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 Wilcox will offset losses from the drop in Babcock Wilcox's long position.| Crane vs. Aquagold International | Crane vs. Morningstar Unconstrained Allocation | Crane vs. High Yield Municipal Fund | Crane vs. Thrivent High Yield |
| Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Hillenbrand | Babcock Wilcox vs. Ingersoll Rand |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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