Correlation Between Babcock Wilcox and XOMA

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

Diversification Opportunities for Babcock Wilcox and XOMA

0.15

Correlation Coefficient

Babcock Wilcox  XOMA

Average diversification

The 3 months correlation between Babcock and XOMA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA 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 XOMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and XOMA go up and down completely randomly.

Pair Corralation between Babcock Wilcox and XOMA

Assuming the 90 days horizon Babcock Wilcox Enterprises is expected to generate 14.33 times more return on investment than XOMA. However, Babcock Wilcox is 14.33 times more volatile than XOMA Corporation. It trades about 0.06 of its potential returns per unit of risk. XOMA Corporation is currently generating about -0.21 per unit of risk. If you would invest  1,370  in Babcock Wilcox Enterprises on September 1, 2024 and sell it today you would earn a total of  40.00  from holding Babcock Wilcox Enterprises or generate 2.92% return on investment over 90 days.

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

Babcock Wilcox Enterprises  vs.  XOMA Corp.

Babcock Wilcox Enter

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

XOMA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, XOMA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Babcock Wilcox and XOMA

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

The idea behind Babcock Wilcox Enterprises and XOMA Corporation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.