Correlation Between Babcock Wilcox and Atlas Corp

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

Diversification Opportunities for Babcock Wilcox and Atlas Corp

0.7

Correlation Coefficient

Babcock Wilcox  Atlas Corp

Poor diversification

The 3 months correlation between Babcock and Atlas is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises, and Atlas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Corp 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 Atlas Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Corp has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Atlas Corp go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Atlas Corp

Given the investment horizon of 90 days Babcock Wilcox Enterprises, is expected to generate 2.72 times more return on investment than Atlas Corp. However, Babcock Wilcox is 2.72 times more volatile than Atlas Corp. It trades about 0.03 of its potential returns per unit of risk. Atlas Corp is currently generating about -0.05 per unit of risk. If you would invest  2,395  in Babcock Wilcox Enterprises, on September 3, 2024 and sell it today you would earn a total of  14.00  from holding Babcock Wilcox Enterprises, or generate 0.58% return on investment over 90 days.

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

Babcock Wilcox Enterprises,  vs.  Atlas Corp

Babcock Wilcox Enter

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises, are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Babcock Wilcox displayed solid returns over the last few months and may actually be approaching a breakup point.

Atlas Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Atlas Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Babcock Wilcox and Atlas Corp

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

The idea behind Babcock Wilcox Enterprises, and Atlas Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.