Correlation Between Eagle Materials and Babcock Wilcox
Can any of the company-specific risk be diversified away by investing in both Eagle Materials 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 Eagle Materials and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eagle Materials and Babcock Wilcox Enterprises,, you can compare the effects of market volatilities on Eagle Materials 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 Eagle Materials with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Materials and Babcock Wilcox.
Diversification Opportunities for Eagle Materials and Babcock Wilcox
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eagle and Babcock is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials 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 Eagle Materials 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 Eagle Materials 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 Eagle Materials i.e., Eagle Materials and Babcock Wilcox go up and down completely randomly.
Pair Corralation between Eagle Materials and Babcock Wilcox
Considering the 90-day investment horizon Eagle Materials is expected to generate 2.23 times more return on investment than Babcock Wilcox. However, Eagle Materials is 2.23 times more volatile than Babcock Wilcox Enterprises,. It trades about 0.24 of its potential returns per unit of risk. Babcock Wilcox Enterprises, is currently generating about -0.11 per unit of risk. If you would invest 28,904 in Eagle Materials on August 28, 2024 and sell it today you would earn a total of 2,625 from holding Eagle Materials or generate 9.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eagle Materials vs. Babcock Wilcox Enterprises,
Performance |
| Timeline |
| Eagle Materials |
| Babcock Wilcox Enter |
Eagle Materials and Babcock Wilcox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eagle Materials and Babcock Wilcox
The main advantage of trading using opposite Eagle Materials and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials 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.| Eagle Materials vs. Holcim | Eagle Materials vs. Lafargeholcim Ltd ADR | Eagle Materials vs. The Monarch Cement |
| Babcock Wilcox vs. Harrow Health 8625 | Babcock Wilcox vs. Babcock Wilcox Enterprises | Babcock Wilcox vs. B Riley Financial | Babcock Wilcox vs. Eagle Point Credit |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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