Correlation Between Babcock Wilcox and B Riley

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

Diversification Opportunities for Babcock Wilcox and B Riley

0.58

Correlation Coefficient

Babcock Wilcox  B Riley

Very weak diversification

The 3 months correlation between Babcock and RILYT is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises, and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial 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 B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and B Riley go up and down completely randomly.

Pair Corralation between Babcock Wilcox and B Riley

Given the investment horizon of 90 days Babcock Wilcox Enterprises, is expected to under-perform the B Riley. But the stock apears to be less risky and, when comparing its historical volatility, Babcock Wilcox Enterprises, is 4.11 times less risky than B Riley. The stock trades about -0.03 of its potential returns per unit of risk. The B Riley Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,047  in B Riley Financial on December 1, 2024 and sell it today you would earn a total of  231.00  from holding B Riley Financial or generate 22.06% return on investment over 90 days.

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

Babcock Wilcox Enterprises,  vs.  B Riley Financial

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 very healthy basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

B Riley Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, B Riley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Babcock Wilcox and B Riley

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

The idea behind Babcock Wilcox Enterprises, and B Riley Financial 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.