Correlation Between Babcock Wilcox and Sachem Capital

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

Diversification Opportunities for Babcock Wilcox and Sachem Capital

-0.38

Correlation Coefficient

Babcock Wilcox  Sachem Capital

Very good diversification

The 3 months correlation between Babcock and Sachem is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises, and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Sachem Capital go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Sachem Capital

Given the investment horizon of 90 days Babcock Wilcox Enterprises, is expected to under-perform the Sachem Capital. In addition to that, Babcock Wilcox is 2.05 times more volatile than Sachem Capital Corp. It trades about -0.04 of its total potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.07 per unit of volatility. If you would invest  2,418  in Sachem Capital Corp on December 28, 2024 and sell it today you would earn a total of  59.00  from holding Sachem Capital Corp or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Babcock Wilcox Enterprises,  vs.  Sachem Capital Corp

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.

Sachem Capital Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sachem Capital Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Sachem Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Babcock Wilcox and Sachem Capital

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

The idea behind Babcock Wilcox Enterprises, and Sachem Capital 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..