Correlation Between Babcock Wilcox and Volato

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

Diversification Opportunities for Babcock Wilcox and Volato

0.94

Correlation Coefficient

Babcock Wilcox  Volato

Almost no diversification

The 3 months correlation between Babcock and Volato is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Volato Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volato 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 Volato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volato Group has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Volato go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Volato

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to generate 0.39 times more return on investment than Volato. However, Babcock Wilcox Enterprises is 2.55 times less risky than Volato. It trades about -0.28 of its potential returns per unit of risk. Volato Group is currently generating about -0.13 per unit of risk. If you would invest  162.00  in Babcock Wilcox Enterprises on December 28, 2024 and sell it today you would lose (91.10) from holding Babcock Wilcox Enterprises or give up 56.23% of portfolio value over 90 days.

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

Babcock Wilcox Enterprises  vs.  Volato 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Volato Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volato Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Babcock Wilcox and Volato

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

The idea behind Babcock Wilcox Enterprises and Volato 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.