Correlation Between Badger Infrastructure and Bilfinger

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

By analyzing existing cross correlation between Badger Infrastructure Solutions and Bilfinger SE ADR, you can compare the effects of market volatilities on Badger Infrastructure and Bilfinger 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 Badger Infrastructure with a short position of Bilfinger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Badger Infrastructure and Bilfinger.

Diversification Opportunities for Badger Infrastructure and Bilfinger

0.45

Correlation Coefficient

Badger Infrastructure  Bilfinger

Very weak diversification

The 3 months correlation between Badger and Bilfinger is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Badger Infrastructure Solution and Bilfinger SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilfinger SE ADR and Badger Infrastructure 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 Badger Infrastructure Solutions are associated (or correlated) with Bilfinger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilfinger SE ADR has no effect on the direction of Badger Infrastructure i.e., Badger Infrastructure and Bilfinger go up and down completely randomly.

Pair Corralation between Badger Infrastructure and Bilfinger

Assuming the 90 days horizon Badger Infrastructure Solutions is expected to generate 1.57 times more return on investment than Bilfinger. However, Badger Infrastructure is 1.57 times more volatile than Bilfinger SE ADR. It trades about 0.02 of its potential returns per unit of risk. Bilfinger SE ADR is currently generating about -0.06 per unit of risk. If you would invest  2,715  in Badger Infrastructure Solutions on September 2, 2024 and sell it today you would earn a total of  38.00  from holding Badger Infrastructure Solutions or generate 1.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Badger Infrastructure Solution  vs.  Bilfinger SE ADR

Badger Infrastructure

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Infrastructure Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Badger Infrastructure is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Bilfinger SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bilfinger SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bilfinger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Badger Infrastructure and Bilfinger

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

The idea behind Badger Infrastructure Solutions and Bilfinger SE ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.