Correlation Between Babcock Wilcox and Steel Partners

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

Diversification Opportunities for Babcock Wilcox and Steel Partners

-0.41

Correlation Coefficient

Babcock Wilcox  Steel Partners

Very good diversification

The 3 months correlation between Babcock and Steel is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners Holdings 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 Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Steel Partners go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Steel Partners

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Steel Partners. In addition to that, Babcock Wilcox is 2.11 times more volatile than Steel Partners Holdings. It trades about -0.01 of its total potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.03 per unit of volatility. If you would invest  4,095  in Steel Partners Holdings on September 30, 2024 and sell it today you would earn a total of  130.00  from holding Steel Partners Holdings or generate 3.17% return on investment over 90 days.

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

Babcock Wilcox Enterprises  vs.  Steel Partners Holdings

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 fairly stable basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Steel Partners Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Partners Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Steel Partners is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Babcock Wilcox and Steel Partners

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

The idea behind Babcock Wilcox Enterprises and Steel Partners 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..