Correlation Between Babcock Wilcox and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and GE Aerospace 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 GE Aerospace 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 GE Aerospace, you can compare the effects of market volatilities on Babcock Wilcox and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and GE Aerospace.
Diversification Opportunities for Babcock Wilcox and GE Aerospace
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Babcock and GE Aerospace is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and GE Aerospace go up and down completely randomly.
Pair Corralation between Babcock Wilcox and GE Aerospace
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the GE Aerospace. In addition to that, Babcock Wilcox is 4.58 times more volatile than GE Aerospace. It trades about -0.06 of its total potential returns per unit of risk. GE Aerospace is currently generating about 0.18 per unit of volatility. If you would invest 8,040 in GE Aerospace on January 26, 2024 and sell it today you would earn a total of 7,879 from holding GE Aerospace or generate 98.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. GE Aerospace
Performance |
| Timeline |
| Babcock Wilcox Enter |
| GE Aerospace |
Babcock Wilcox and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and GE Aerospace
The main advantage of trading using opposite Babcock Wilcox and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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