Correlation Between Babcock Wilcox and Kimball Electronics

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

Diversification Opportunities for Babcock Wilcox and Kimball Electronics

0.48

Correlation Coefficient

Babcock Wilcox  Kimball Electronics

Very weak diversification

The 3 months correlation between Babcock and Kimball is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Kimball Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimball Electronics 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 Kimball Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimball Electronics has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Kimball Electronics go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Kimball Electronics

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Kimball Electronics. In addition to that, Babcock Wilcox is 2.78 times more volatile than Kimball Electronics. It trades about -0.3 of its total potential returns per unit of risk. Kimball Electronics is currently generating about 0.06 per unit of volatility. If you would invest  2,057  in Kimball Electronics on January 24, 2024 and sell it today you would earn a total of  32.00  from holding Kimball Electronics or generate 1.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Kimball Electronics

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.

Kimball Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimball Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Babcock Wilcox and Kimball Electronics

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

The idea behind Babcock Wilcox Enterprises and Kimball Electronics 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.