Correlation Between BWX Technologies and Hensoldt

Can any of the company-specific risk be diversified away by investing in both BWX Technologies and Hensoldt 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 BWX Technologies and Hensoldt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BWX Technologies and Hensoldt AG, you can compare the effects of market volatilities on BWX Technologies and Hensoldt 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 BWX Technologies with a short position of Hensoldt. Check out your portfolio center. Please also check ongoing floating volatility patterns of BWX Technologies and Hensoldt.

Diversification Opportunities for BWX Technologies and Hensoldt

-0.06

Correlation Coefficient

BWX Technologies  Hensoldt

Good diversification

The 3 months correlation between BWX and Hensoldt is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding BWX Technologies and Hensoldt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensoldt AG and BWX Technologies 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 BWX Technologies are associated (or correlated) with Hensoldt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensoldt AG has no effect on the direction of BWX Technologies i.e., BWX Technologies and Hensoldt go up and down completely randomly.

Pair Corralation between BWX Technologies and Hensoldt

Given the investment horizon of 90 days BWX Technologies is expected to under-perform the Hensoldt. But the stock apears to be less risky and, when comparing its historical volatility, BWX Technologies is 2.17 times less risky than Hensoldt. The stock trades about -0.14 of its potential returns per unit of risk. The Hensoldt AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,999  in Hensoldt AG on December 3, 2024 and sell it today you would earn a total of  1,671  from holding Hensoldt AG or generate 41.79% return on investment over 90 days.

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

BWX Technologies  vs.  Hensoldt AG

BWX Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days BWX Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hensoldt AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hensoldt AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Hensoldt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BWX Technologies and Hensoldt

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

The idea behind BWX Technologies and Hensoldt AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.