Correlation Between Babcock Wilcox and Enerpac Tool

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

Diversification Opportunities for Babcock Wilcox and Enerpac Tool

0.36

Correlation Coefficient

Babcock Wilcox  Enerpac Tool

Weak diversification

The 3 months correlation between Babcock and Enerpac is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Enerpac Tool Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enerpac Tool Group 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 Enerpac Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enerpac Tool Group has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Enerpac Tool go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Enerpac Tool

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Enerpac Tool. In addition to that, Babcock Wilcox is 2.77 times more volatile than Enerpac Tool Group. It trades about -0.22 of its total potential returns per unit of risk. Enerpac Tool Group is currently generating about -0.06 per unit of volatility. If you would invest  4,826  in Enerpac Tool Group on November 28, 2024 and sell it today you would lose (299.00) from holding Enerpac Tool Group or give up 6.2% of portfolio value over 90 days.

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

Babcock Wilcox Enterprises  vs.  Enerpac Tool Group

Babcock Wilcox Enter

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Enerpac Tool Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enerpac Tool Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enerpac Tool is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Babcock Wilcox and Enerpac Tool

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

The idea behind Babcock Wilcox Enterprises and Enerpac Tool Group 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.