Correlation Between Grupo Carso and Babcock Wilcox

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

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

Diversification Opportunities for Grupo Carso and Babcock Wilcox

0.64

Correlation Coefficient

Grupo Carso  Babcock Wilcox

Poor diversification

The 3 months correlation between Grupo and Babcock is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB 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 Grupo Carso 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 Grupo Carso SAB 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 Grupo Carso i.e., Grupo Carso and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Grupo Carso and Babcock Wilcox

Assuming the 90 days horizon Grupo Carso SAB is expected to generate 0.91 times more return on investment than Babcock Wilcox. However, Grupo Carso SAB is 1.1 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 -0.03 per unit of risk. If you would invest  760.00  in Grupo Carso SAB on January 20, 2024 and sell it today you would earn a total of  115.00  from holding Grupo Carso SAB or generate 15.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Grupo Carso SAB  vs.  Babcock Wilcox Enterprises

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Grupo Carso and Babcock Wilcox

The main advantage of trading using opposite Grupo Carso and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Carso 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 Grupo Carso SAB 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.