Correlation Between Obayashi and Babcock International
Can any of the company-specific risk be diversified away by investing in both Obayashi 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 Obayashi and Babcock International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Obayashi and Babcock International Group, you can compare the effects of market volatilities on Obayashi 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 Obayashi with a short position of Babcock International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Obayashi and Babcock International.
Diversification Opportunities for Obayashi and Babcock International
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Obayashi and Babcock is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and Babcock International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock International and Obayashi 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 Obayashi 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 Obayashi i.e., Obayashi and Babcock International go up and down completely randomly.
Pair Corralation between Obayashi and Babcock International
Assuming the 90 days horizon Obayashi is expected to generate 1.85 times more return on investment than Babcock International. However, Obayashi is 1.85 times more volatile than Babcock International Group. It trades about 0.26 of its potential returns per unit of risk. Babcock International Group is currently generating about 0.06 per unit of risk. If you would invest 1,134 in Obayashi on September 3, 2024 and sell it today you would earn a total of 266.00 from holding Obayashi or generate 23.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Obayashi vs. Babcock International Group
Performance |
| Timeline |
| Obayashi |
| Babcock International |
Obayashi and Babcock International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Obayashi and Babcock International
The main advantage of trading using opposite Obayashi and Babcock International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi 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.The idea behind Obayashi and Babcock International Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Babcock International vs. ACS Actividades de | Babcock International vs. ACS Actividades De | Babcock International vs. Bouygues SA ADR |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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