Correlation Between Hillenbrand and Babcock Wilcox

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

Diversification Opportunities for Hillenbrand and Babcock Wilcox

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Hillenbrand and Babcock is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand 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 Hillenbrand 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 Hillenbrand 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 Hillenbrand i.e., Hillenbrand and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Hillenbrand and Babcock Wilcox

Allowing for the 90-day total investment horizon Hillenbrand is expected to generate 1.33 times less return on investment than Babcock Wilcox. But when comparing it to its historical volatility, Hillenbrand is 7.31 times less risky than Babcock Wilcox. It trades about 0.19 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  129.00  in Babcock Wilcox Enterprises on December 29, 2023 and sell it today you would lose (6.00) from holding Babcock Wilcox Enterprises or give up 4.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hillenbrand  vs.  Babcock Wilcox Enterprises

 Performance 
       Timeline  
Hillenbrand 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Hillenbrand is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
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 weak basic indicators, Babcock Wilcox may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Hillenbrand and Babcock Wilcox Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hillenbrand and Babcock Wilcox

The main advantage of trading using opposite Hillenbrand and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hillenbrand 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.
The idea behind Hillenbrand and Babcock Wilcox Enterprises 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.
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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