Correlation Between Enpro Industries and Babcock Wilcox

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

By analyzing existing cross correlation between Enpro Industries and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Enpro Industries 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 Enpro Industries with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enpro Industries and Babcock Wilcox.

Diversification Opportunities for Enpro Industries and Babcock Wilcox

0.18

Correlation Coefficient

Enpro Industries  Babcock Wilcox

Average diversification

The 3 months correlation between Enpro and Babcock is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Enpro Industries 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 Enpro Industries 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 Enpro Industries 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 Enpro Industries i.e., Enpro Industries and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Enpro Industries and Babcock Wilcox

Considering the 90-day investment horizon Enpro Industries is expected to under-perform the Babcock Wilcox. But the stock apears to be less risky and, when comparing its historical volatility, Enpro Industries is 3.8 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 0.04 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Babcock Wilcox Enterprises on February 8, 2024 and sell it today you would lose (4.00) from holding Babcock Wilcox Enterprises or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Enpro Industries  vs.  Babcock Wilcox Enterprises

Enpro Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enpro Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Enpro Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Babcock Wilcox Enter

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Babcock Wilcox showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enpro Industries and Babcock Wilcox

The main advantage of trading using opposite Enpro Industries and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enpro Industries 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 Enpro Industries 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .