Correlation Between Babcock Wilcox and Li Bang

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

Diversification Opportunities for Babcock Wilcox and Li Bang

0.29

Correlation Coefficient

Babcock Wilcox  Li Bang

Modest diversification

The 3 months correlation between Babcock and LBGJ is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Li Bang International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Bang International 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 Li Bang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Bang International has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Li Bang go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Li Bang

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Li Bang. But the stock apears to be less risky and, when comparing its historical volatility, Babcock Wilcox Enterprises is 3.19 times less risky than Li Bang. The stock trades about -0.06 of its potential returns per unit of risk. The Li Bang International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  319.00  in Li Bang International on September 18, 2024 and sell it today you would lose (1.00) from holding Li Bang International or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Li Bang International

Babcock Wilcox Enter

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Babcock Wilcox showed solid returns over the last few months and may actually be approaching a breakup point.

Li Bang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Bang International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in January 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Pair Trading with Babcock Wilcox and Li Bang

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

The idea behind Babcock Wilcox Enterprises and Li Bang International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.