Correlation Between Babcock Wilcox and Purecycle Technologies

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

Diversification Opportunities for Babcock Wilcox and Purecycle Technologies

0.68

Correlation Coefficient

Babcock Wilcox  Purecycle Technologies

Poor diversification

The 3 months correlation between Babcock and Purecycle is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Purecycle Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purecycle Technologies 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 Purecycle Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purecycle Technologies has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Purecycle Technologies go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Purecycle Technologies

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Purecycle Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Babcock Wilcox Enterprises is 1.19 times less risky than Purecycle Technologies. The stock trades about -0.22 of its potential returns per unit of risk. The Purecycle Technologies Holdings is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,588  in Purecycle Technologies Holdings on November 28, 2024 and sell it today you would lose (488.00) from holding Purecycle Technologies Holdings or give up 30.73% of portfolio value over 90 days.

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

Babcock Wilcox Enterprises  vs.  Purecycle Technologies Holding

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.

Purecycle Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Purecycle Technologies Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Babcock Wilcox and Purecycle Technologies

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

The idea behind Babcock Wilcox Enterprises and Purecycle Technologies Holdings 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.