Correlation Between Babcock Wilcox and Kossan Rubber

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

Diversification Opportunities for Babcock Wilcox and Kossan Rubber

-0.86

Correlation Coefficient

Babcock Wilcox  Kossan Rubber

Pay attention - limited upside

The 3 months correlation between Babcock and Kossan is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Kossan Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kossan Rubber Industries 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 Kossan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kossan Rubber Industries has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Kossan Rubber go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Kossan Rubber

Given the investment horizon of 90 days Babcock Wilcox Enterprises is expected to under-perform the Kossan Rubber. In addition to that, Babcock Wilcox is 3.73 times more volatile than Kossan Rubber Industries. It trades about -0.04 of its total potential returns per unit of risk. Kossan Rubber Industries is currently generating about 0.16 per unit of volatility. If you would invest  25.00  in Kossan Rubber Industries on January 25, 2024 and sell it today you would earn a total of  2.00  from holding Kossan Rubber Industries or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Kossan Rubber Industries

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. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kossan Rubber Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kossan Rubber Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, Kossan Rubber may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Babcock Wilcox and Kossan Rubber

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

The idea behind Babcock Wilcox Enterprises and Kossan Rubber Industries 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.