Correlation Between Microsoft and Babcock Wilcox
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Babcock Wilcox.
Diversification Opportunities for Microsoft and Babcock Wilcox
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Babcock is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Babcock Wilcox go up and down completely randomly.
Pair Corralation between Microsoft and Babcock Wilcox
Given the investment horizon of 90 days Microsoft is expected to under-perform the Babcock Wilcox. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 8.97 times less risky than Babcock Wilcox. The stock trades about -0.04 of its potential returns per unit of risk. The Babcock Wilcox Enterprises is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 78.00 in Babcock Wilcox Enterprises on January 16, 2024 and sell it today you would earn a total of 27.00 from holding Babcock Wilcox Enterprises or generate 34.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. Babcock Wilcox Enterprises
Performance |
| Timeline |
| Microsoft |
| Babcock Wilcox Enter |
Microsoft and Babcock Wilcox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Babcock Wilcox
The main advantage of trading using opposite Microsoft and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Cloudflare | Microsoft vs. Okta Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Nutanix |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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