Correlation Between Babcock Wilcox and Natures Miracle

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

Diversification Opportunities for Babcock Wilcox and Natures Miracle

0.4

Correlation Coefficient

Babcock Wilcox  Natures Miracle

Very weak diversification

The 3 months correlation between Babcock and Natures is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Natures Miracle Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Miracle Holding 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 Natures Miracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Miracle Holding has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Natures Miracle go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Natures Miracle

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Natures Miracle. But the stock apears to be less risky and, when comparing its historical volatility, Babcock Wilcox Enterprises is 4.95 times less risky than Natures Miracle. The stock trades about -0.01 of its potential returns per unit of risk. The Natures Miracle Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4.92  in Natures Miracle Holding on October 11, 2024 and sell it today you would lose (3.34) from holding Natures Miracle Holding or give up 67.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	26.41%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Natures Miracle Holding

Babcock Wilcox Enter

Risk-Adjusted Performance

0 of 100

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Natures Miracle Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natures Miracle Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Natures Miracle showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Babcock Wilcox and Natures Miracle

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

The idea behind Babcock Wilcox Enterprises and Natures Miracle Holding 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.