Correlation Between Broadwind Energy and Babcock Wilcox

Can any of the company-specific risk be diversified away by investing in both Broadwind Energy 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 Broadwind Energy and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Broadwind Energy and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Broadwind Energy 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 Broadwind Energy with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadwind Energy and Babcock Wilcox.

Diversification Opportunities for Broadwind Energy and Babcock Wilcox

0.38

Correlation Coefficient

Broadwind Energy  Babcock Wilcox

Weak diversification

The 3 months correlation between Broadwind and Babcock is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind Energy 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 Broadwind Energy 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 Broadwind Energy 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 Broadwind Energy i.e., Broadwind Energy and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Broadwind Energy and Babcock Wilcox

Given the investment horizon of 90 days Broadwind Energy is expected to generate 0.65 times more return on investment than Babcock Wilcox. However, Broadwind Energy is 1.53 times less risky than Babcock Wilcox. It trades about -0.05 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.34 per unit of risk. If you would invest  222.00  in Broadwind Energy on January 25, 2024 and sell it today you would lose (8.00) from holding Broadwind Energy or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Broadwind Energy  vs.  Babcock Wilcox Enterprises

Broadwind Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadwind Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.

Pair Trading with Broadwind Energy and Babcock Wilcox

The main advantage of trading using opposite Broadwind Energy and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadwind Energy 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 Broadwind Energy 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.