Correlation Between Enerpac Tool and Babcock Wilcox

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

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

Diversification Opportunities for Enerpac Tool and Babcock Wilcox

-0.57

Correlation Coefficient

Enerpac Tool  Babcock Wilcox

Excellent diversification

The 3 months correlation between Enerpac and Babcock is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Enerpac Tool Group 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 Enerpac Tool 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 Enerpac Tool Group 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 Enerpac Tool i.e., Enerpac Tool and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Enerpac Tool and Babcock Wilcox

Given the investment horizon of 90 days Enerpac Tool Group is expected to generate 0.32 times more return on investment than Babcock Wilcox. However, Enerpac Tool Group is 3.13 times less risky than Babcock Wilcox. It trades about 0.07 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.03 per unit of risk. If you would invest  2,008  in Enerpac Tool Group on January 26, 2024 and sell it today you would earn a total of  1,609  from holding Enerpac Tool Group or generate 80.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Enerpac Tool Group  vs.  Babcock Wilcox Enterprises

Enerpac Tool Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enerpac Tool Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Enerpac Tool exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Enerpac Tool and Babcock Wilcox

The main advantage of trading using opposite Enerpac Tool and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enerpac Tool 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 Enerpac Tool Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.