Correlation Between Crane and Babcock Wilcox
Can any of the company-specific risk be diversified away by investing in both Crane 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 Crane and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crane Company and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Crane 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 Crane with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crane and Babcock Wilcox.
Diversification Opportunities for Crane and Babcock Wilcox
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Crane and Babcock is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Crane Company 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 Crane 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 Crane Company 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 Crane i.e., Crane and Babcock Wilcox go up and down completely randomly.
Pair Corralation between Crane and Babcock Wilcox
Allowing for the 90-day total investment horizon Crane Company is expected to generate 0.4 times more return on investment than Babcock Wilcox. However, Crane Company is 2.5 times less risky than Babcock Wilcox. It trades about 0.05 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.03 per unit of risk. If you would invest 9,558 in Crane Company on January 26, 2024 and sell it today you would earn a total of 4,655 from holding Crane Company or generate 48.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Crane Company vs. Babcock Wilcox Enterprises
Performance |
| Timeline |
| Crane Company |
| Babcock Wilcox Enter |
Crane and Babcock Wilcox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crane and Babcock Wilcox
The main advantage of trading using opposite Crane and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crane 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 Crane Company 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.| Babcock Wilcox vs. Pioneer Power Solutions | Babcock Wilcox vs. CBAK Energy Technology | Babcock Wilcox vs. Ideal Power | Babcock Wilcox vs. Expion360 |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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