Correlation Between Eve Holding and BWX Technologies

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

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

Diversification Opportunities for Eve Holding and BWX Technologies

0.63

Correlation Coefficient

Eve Holding  BWX Technologies

Poor diversification

The 3 months correlation between Eve and BWX is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and BWX Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BWX Technologies and Eve Holding 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 Eve Holding are associated (or correlated) with BWX Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BWX Technologies has no effect on the direction of Eve Holding i.e., Eve Holding and BWX Technologies go up and down completely randomly.

Pair Corralation between Eve Holding and BWX Technologies

Given the investment horizon of 90 days Eve Holding is expected to generate 2.26 times more return on investment than BWX Technologies. However, Eve Holding is 2.26 times more volatile than BWX Technologies. It trades about 0.19 of its potential returns per unit of risk. BWX Technologies is currently generating about 0.26 per unit of risk. If you would invest  275.00  in Eve Holding on September 2, 2024 and sell it today you would earn a total of  144.00  from holding Eve Holding or generate 52.36% return on investment over 90 days.

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

Eve Holding  vs.  BWX Technologies

Eve Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eve Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Eve Holding showed solid returns over the last few months and may actually be approaching a breakup point.

BWX Technologies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BWX Technologies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, BWX Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eve Holding and BWX Technologies

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

The idea behind Eve Holding and BWX Technologies 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.