Correlation Between Bilfinger and Badger Infrastructure

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

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

Diversification Opportunities for Bilfinger and Badger Infrastructure

0.3

Correlation Coefficient

Bilfinger  Badger Infrastructure

Weak diversification

The 3 months correlation between Bilfinger and Badger is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bilfinger SE ADR and Badger Infrastructure Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger Infrastructure and Bilfinger 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 Bilfinger SE ADR are associated (or correlated) with Badger Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger Infrastructure has no effect on the direction of Bilfinger i.e., Bilfinger and Badger Infrastructure go up and down completely randomly.

Pair Corralation between Bilfinger and Badger Infrastructure

Assuming the 90 days horizon Bilfinger SE ADR is expected to generate 1.09 times more return on investment than Badger Infrastructure. However, Bilfinger is 1.09 times more volatile than Badger Infrastructure Solutions. It trades about 0.13 of its potential returns per unit of risk. Badger Infrastructure Solutions is currently generating about 0.01 per unit of risk. If you would invest  942.00  in Bilfinger SE ADR on December 1, 2024 and sell it today you would earn a total of  193.00  from holding Bilfinger SE ADR or generate 20.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.33%
Values	Daily Returns

Bilfinger SE ADR  vs.  Badger Infrastructure Solution

Bilfinger SE ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bilfinger SE ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Bilfinger showed solid returns over the last few months and may actually be approaching a breakup point.

Badger Infrastructure

Risk-Adjusted Performance

Modest

Over the last 90 days Badger Infrastructure Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Bilfinger and Badger Infrastructure

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

The idea behind Bilfinger SE ADR and Badger Infrastructure Solutions 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.