Correlation Between Babcock Wilcox and Enovix Corp

Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Enovix Corp 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 Enovix Corp 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 Enovix Corp, you can compare the effects of market volatilities on Babcock Wilcox and Enovix Corp 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 Enovix Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Enovix Corp.

Diversification Opportunities for Babcock Wilcox and Enovix Corp

0.55

Correlation Coefficient

Babcock Wilcox  Enovix Corp

Very weak diversification

The 3 months correlation between Babcock and Enovix is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Enovix Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enovix Corp 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 Enovix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enovix Corp has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Enovix Corp go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Enovix Corp

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to generate 1.78 times more return on investment than Enovix Corp. However, Babcock Wilcox is 1.78 times more volatile than Enovix Corp. It trades about -0.07 of its potential returns per unit of risk. Enovix Corp is currently generating about -0.12 per unit of risk. If you would invest  534.00  in Babcock Wilcox Enterprises on January 24, 2024 and sell it today you would lose (437.00) from holding Babcock Wilcox Enterprises or give up 81.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.46%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Enovix Corp

Babcock Wilcox Enter

Risk-Adjusted Performance

0 of 100

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.

Enovix Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enovix Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Babcock Wilcox and Enovix Corp

The main advantage of trading using opposite Babcock Wilcox and Enovix Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Enovix Corp 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 Enovix Corp will offset losses from the drop in Enovix Corp's long position.

The idea behind Babcock Wilcox Enterprises and Enovix Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.