Correlation Between IDEX and Babcock Wilcox
Can any of the company-specific risk be diversified away by investing in both IDEX 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 IDEX and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on IDEX 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 IDEX with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Babcock Wilcox.
Diversification Opportunities for IDEX and Babcock Wilcox
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IDEX and Babcock is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. 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 IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and Babcock Wilcox go up and down completely randomly.
Pair Corralation between IDEX and Babcock Wilcox
Considering the 90-day investment horizon IDEX Corporation is expected to under-perform the Babcock Wilcox. But the stock apears to be less risky and, when comparing its historical volatility, IDEX Corporation is 7.99 times less risky than Babcock Wilcox. The stock trades about -0.22 of its potential returns per unit of risk. The Babcock Wilcox Enterprises is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 89.00 in Babcock Wilcox Enterprises on January 19, 2024 and sell it today you would earn a total of 12.00 from holding Babcock Wilcox Enterprises or generate 13.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IDEX Corp. vs. Babcock Wilcox Enterprises
Performance |
| Timeline |
| IDEX |
| Babcock Wilcox Enter |
IDEX and Babcock Wilcox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Babcock Wilcox
The main advantage of trading using opposite IDEX and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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 IDEX Corporation 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.| Babcock Wilcox vs. Illinois Tool Works | Babcock Wilcox vs. Pentair PLC | Babcock Wilcox vs. Emerson Electric | Babcock Wilcox vs. Smith AO |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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