Correlation Between Babcock Wilcox and FuelCell Energy
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and FuelCell Energy 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 FuelCell Energy 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 FuelCell Energy, you can compare the effects of market volatilities on Babcock Wilcox and FuelCell Energy 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 FuelCell Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and FuelCell Energy.
Diversification Opportunities for Babcock Wilcox and FuelCell Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Babcock and FuelCell is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell Energy 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and FuelCell Energy go up and down completely randomly.
Pair Corralation between Babcock Wilcox and FuelCell Energy
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to generate 2.46 times more return on investment than FuelCell Energy. However, Babcock Wilcox is 2.46 times more volatile than FuelCell Energy. It trades about 0.04 of its potential returns per unit of risk. FuelCell Energy is currently generating about -0.04 per unit of risk. 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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Babcock Wilcox Enterprises vs. FuelCell Energy
Performance |
Timeline |
Babcock Wilcox Enter |
FuelCell Energy |
Babcock Wilcox and FuelCell Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Babcock Wilcox and FuelCell Energy
The main advantage of trading using opposite Babcock Wilcox and FuelCell Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, FuelCell Energy 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 FuelCell Energy will offset losses from the drop in FuelCell Energy's long position.Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. General Electric | Babcock Wilcox vs. Hillenbrand |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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