Correlation Between TPI Composites and Babcock Wilcox

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

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

Diversification Opportunities for TPI Composites and Babcock Wilcox

0.74

Correlation Coefficient

TPI Composites  Babcock Wilcox

Poor diversification

The 3 months correlation between TPI and Babcock is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TPI Composites 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 TPI Composites 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 TPI Composites 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 TPI Composites i.e., TPI Composites and Babcock Wilcox go up and down completely randomly.

Pair Corralation between TPI Composites and Babcock Wilcox

Given the investment horizon of 90 days TPI Composites is expected to generate 3.68 times less return on investment than Babcock Wilcox. In addition to that, TPI Composites is 1.31 times more volatile than Babcock Wilcox Enterprises. It trades about 0.01 of its total potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about 0.06 per unit of volatility. If you would invest  120.00  in Babcock Wilcox Enterprises on October 7, 2024 and sell it today you would earn a total of  58.00  from holding Babcock Wilcox Enterprises or generate 48.33% return on investment over 90 days.

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

TPI Composites  vs.  Babcock Wilcox Enterprises

TPI Composites

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPI Composites 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 forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Babcock Wilcox Enter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Babcock Wilcox Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with TPI Composites and Babcock Wilcox

The main advantage of trading using opposite TPI Composites and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPI Composites 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 TPI Composites 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.