Correlation Between Graham and Babcock Wilcox

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

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

Diversification Opportunities for Graham and Babcock Wilcox

0.39

Correlation Coefficient

Graham  Babcock Wilcox

Weak diversification

The 3 months correlation between Graham and Babcock is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Graham 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 Graham 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 Graham 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 Graham i.e., Graham and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Graham and Babcock Wilcox

Considering the 90-day investment horizon Graham is expected to under-perform the Babcock Wilcox. In addition to that, Graham is 1.72 times more volatile than Babcock Wilcox Enterprises. It trades about -0.11 of its total potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.17 per unit of volatility. If you would invest  1,348  in Babcock Wilcox Enterprises on December 1, 2024 and sell it today you would lose (284.00) from holding Babcock Wilcox Enterprises or give up 21.07% of portfolio value over 90 days.

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

Graham  vs.  Babcock Wilcox Enterprises

Graham

Risk-Adjusted Performance

Very Weak

Over the last 90 days Graham has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. Despite weak performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Graham and Babcock Wilcox

The main advantage of trading using opposite Graham and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham 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 Graham 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.