Correlation Between Innovative Solutions and BWX Technologies
Can any of the company-specific risk be diversified away by investing in both Innovative Solutions and BWX Technologies 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 Innovative Solutions and BWX Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovative Solutions and and BWX Technologies, you can compare the effects of market volatilities on Innovative Solutions and BWX Technologies 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 Innovative Solutions with a short position of BWX Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Solutions and BWX Technologies.
Diversification Opportunities for Innovative Solutions and BWX Technologies
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovative and BWX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Solutions and and BWX Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BWX Technologies and Innovative Solutions 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 Innovative Solutions and are associated (or correlated) with BWX Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BWX Technologies has no effect on the direction of Innovative Solutions i.e., Innovative Solutions and BWX Technologies go up and down completely randomly.
Pair Corralation between Innovative Solutions and BWX Technologies
Given the investment horizon of 90 days Innovative Solutions is expected to generate 1.23 times less return on investment than BWX Technologies. But when comparing it to its historical volatility, Innovative Solutions and is 1.33 times less risky than BWX Technologies. It trades about 0.2 of its potential returns per unit of risk. BWX Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 12,152 in BWX Technologies on September 1, 2024 and sell it today you would earn a total of 933.00 from holding BWX Technologies or generate 7.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovative Solutions and vs. BWX Technologies
Performance |
| Timeline |
| Innovative Solutions and |
| BWX Technologies |
Innovative Solutions and BWX Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovative Solutions and BWX Technologies
The main advantage of trading using opposite Innovative Solutions and BWX Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Solutions position performs unexpectedly, BWX Technologies 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 BWX Technologies will offset losses from the drop in BWX Technologies' long position.| Innovative Solutions vs. Park Electrochemical | Innovative Solutions vs. VSE Corporation | Innovative Solutions vs. Curtiss Wright | Innovative Solutions vs. Ducommun Incorporated |
| BWX Technologies vs. Hexcel | BWX Technologies vs. Ducommun Incorporated | BWX Technologies vs. Mercury Systems | BWX Technologies vs. Woodward |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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