Correlation Between Babcock Wilcox and FuelCell Energy

Specify exactly 2 symbols:
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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Babcock Wilcox Enterprises  vs.  FuelCell Energy

 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 weak basic indicators, Babcock Wilcox may actually be approaching a critical reversion point that can send shares even higher in April 2024.
FuelCell Energy 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.
The idea behind Babcock Wilcox Enterprises and FuelCell Energy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

Other Complementary Tools

My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
CEOs Directory
Screen CEOs from public companies around the world
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Sectors
List of equity sectors categorizing publicly traded companies based on their primary business activities
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum