Correlation Between VirTra and BWX Technologies

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

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

Diversification Opportunities for VirTra and BWX Technologies

0.81

Correlation Coefficient

VirTra  BWX Technologies

Very poor diversification

The 3 months correlation between VirTra and BWX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VirTra Inc and BWX Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BWX Technologies and VirTra 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 VirTra Inc 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 VirTra i.e., VirTra and BWX Technologies go up and down completely randomly.

Pair Corralation between VirTra and BWX Technologies

Given the investment horizon of 90 days VirTra Inc is expected to under-perform the BWX Technologies. But the stock apears to be less risky and, when comparing its historical volatility, VirTra Inc is 1.03 times less risky than BWX Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The BWX Technologies is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  11,223  in BWX Technologies on December 27, 2024 and sell it today you would lose (749.00) from holding BWX Technologies or give up 6.67% of portfolio value over 90 days.

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

VirTra Inc  vs.  BWX Technologies

VirTra Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days VirTra Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

BWX Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days BWX Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BWX Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VirTra and BWX Technologies

The main advantage of trading using opposite VirTra and BWX Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VirTra 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 VirTra Inc 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.