Correlation Between Babcock Wilcox and Worthington Industries

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

Diversification Opportunities for Babcock Wilcox and Worthington Industries

-0.42

Correlation Coefficient

Babcock Wilcox  Worthington Industries

Very good diversification

The 3 months correlation between Babcock and Worthington is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Worthington Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Industries 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 Worthington Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Industries has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Worthington Industries go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Worthington Industries

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Worthington Industries. In addition to that, Babcock Wilcox is 1.23 times more volatile than Worthington Industries. It trades about -0.28 of its total potential returns per unit of risk. Worthington Industries is currently generating about 0.12 per unit of volatility. If you would invest  3,989  in Worthington Industries on December 30, 2024 and sell it today you would earn a total of  1,059  from holding Worthington Industries or generate 26.55% 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.  Worthington Industries

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.

Worthington Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Worthington Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Worthington Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Babcock Wilcox and Worthington Industries

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

The idea behind Babcock Wilcox Enterprises and Worthington Industries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.