Correlation Between Babcock Wilcox and Enerpac Tool

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Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Enerpac Tool 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 Babcock Wilcox and Enerpac Tool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Babcock Wilcox Enterprises and Enerpac Tool Group, you can compare the effects of market volatilities on Babcock Wilcox and Enerpac Tool 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 Babcock Wilcox with a short position of Enerpac Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Enerpac Tool.

Diversification Opportunities for Babcock Wilcox and Enerpac Tool

-0.21
  Correlation Coefficient

Very good diversification

The 3 months correlation between Babcock and Enerpac is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Enerpac Tool Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerpac Tool Group and Babcock Wilcox 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 Babcock Wilcox Enterprises are associated (or correlated) with Enerpac Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerpac Tool Group has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Enerpac Tool go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Enerpac Tool

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Enerpac Tool. In addition to that, Babcock Wilcox is 3.06 times more volatile than Enerpac Tool Group. It trades about -0.03 of its total potential returns per unit of risk. Enerpac Tool Group is currently generating about 0.07 per unit of volatility. If you would invest  2,057  in Enerpac Tool Group on December 30, 2023 and sell it today you would earn a total of  1,509  from holding Enerpac Tool Group or generate 73.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Babcock Wilcox Enterprises  vs.  Enerpac Tool Group

 Performance 
       Timeline  
Babcock Wilcox Enter 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Babcock Wilcox Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Enerpac Tool Group 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Enerpac Tool Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enerpac Tool exhibited solid returns over the last few months and may actually be approaching a breakup point.

Babcock Wilcox and Enerpac Tool Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Babcock Wilcox and Enerpac Tool

The main advantage of trading using opposite Babcock Wilcox and Enerpac Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Enerpac Tool 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 Enerpac Tool will offset losses from the drop in Enerpac Tool's long position.
The idea behind Babcock Wilcox Enterprises and Enerpac Tool 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.
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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