Correlation Between Babcock Wilcox and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Franklin Electric 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 Babcock Wilcox and Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Babcock Wilcox Enterprises and Franklin Electric Co, you can compare the effects of market volatilities on Babcock Wilcox and Franklin Electric 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 Babcock Wilcox with a short position of Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Franklin Electric.
Diversification Opportunities for Babcock Wilcox and Franklin Electric
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Babcock and Franklin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric and Babcock Wilcox 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 Babcock Wilcox Enterprises are associated (or correlated) with Franklin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Electric has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Franklin Electric go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Franklin Electric
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Franklin Electric. In addition to that, Babcock Wilcox is 5.01 times more volatile than Franklin Electric Co. It trades about -0.07 of its total potential returns per unit of risk. Franklin Electric Co is currently generating about -0.1 per unit of volatility. If you would invest 10,518 in Franklin Electric Co on January 26, 2024 and sell it today you would lose (233.00) from holding Franklin Electric Co or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Franklin Electric Co
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Franklin Electric |
Babcock Wilcox and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Franklin Electric
The main advantage of trading using opposite Babcock Wilcox and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Franklin Electric 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 Franklin Electric will offset losses from the drop in Franklin Electric's long position.| Babcock Wilcox vs. Illinois Tool Works | Babcock Wilcox vs. Pentair PLC | Babcock Wilcox vs. Emerson Electric | Babcock Wilcox vs. Smith AO |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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