Correlation Between Franchise and Babcock Wilcox

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

By analyzing existing cross correlation between Franchise Group and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Franchise and Babcock Wilcox 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 Franchise with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franchise and Babcock Wilcox.

Diversification Opportunities for Franchise and Babcock Wilcox

0.12

Correlation Coefficient

Franchise  Babcock Wilcox

Average diversification

The 3 months correlation between Franchise and Babcock is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Franchise Group and Babcock Wilcox Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter and Franchise 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 Franchise Group are associated (or correlated) with Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of Franchise i.e., Franchise and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Franchise and Babcock Wilcox

If you would invest  1,370  in Babcock Wilcox Enterprises on September 1, 2024 and sell it today you would earn a total of  40.00  from holding Babcock Wilcox Enterprises or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Franchise Group  vs.  Babcock Wilcox Enterprises

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Babcock Wilcox Enter

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Franchise and Babcock Wilcox

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

The idea behind Franchise Group and Babcock Wilcox Enterprises 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.