Correlation Between First Ship and Babcock Wilcox

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

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

Diversification Opportunities for First Ship and Babcock Wilcox

0.0

Correlation Coefficient

First Ship  Babcock Wilcox

Pay attention - limited upside

The 3 months correlation between First and Babcock is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Ship Lease 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 First Ship 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 First Ship Lease 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 First Ship i.e., First Ship and Babcock Wilcox go up and down completely randomly.

Pair Corralation between First Ship and Babcock Wilcox

If you would invest  1,935  in Babcock Wilcox Enterprises on December 19, 2024 and sell it today you would lose (9.00) from holding Babcock Wilcox Enterprises or give up 0.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

First Ship Lease  vs.  Babcock Wilcox Enterprises

First Ship Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Babcock Wilcox Enter

Risk-Adjusted Performance

Weak

Over the last 90 days Babcock Wilcox Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. 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 First Ship and Babcock Wilcox

The main advantage of trading using opposite First Ship and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ship 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 First Ship Lease 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.