Correlation Between BWX Technologies and Mercury Systems

Can any of the company-specific risk be diversified away by investing in both BWX Technologies and Mercury Systems 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 BWX Technologies and Mercury Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BWX Technologies and Mercury Systems, you can compare the effects of market volatilities on BWX Technologies and Mercury Systems 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 BWX Technologies with a short position of Mercury Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of BWX Technologies and Mercury Systems.

Diversification Opportunities for BWX Technologies and Mercury Systems

0.78

Correlation Coefficient

BWX Technologies  Mercury Systems

Poor diversification

The 3 months correlation between BWX and Mercury is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BWX Technologies and Mercury Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury Systems and BWX Technologies 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 BWX Technologies are associated (or correlated) with Mercury Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury Systems has no effect on the direction of BWX Technologies i.e., BWX Technologies and Mercury Systems go up and down completely randomly.

Pair Corralation between BWX Technologies and Mercury Systems

Given the investment horizon of 90 days BWX Technologies is expected to generate 0.84 times more return on investment than Mercury Systems. However, BWX Technologies is 1.18 times less risky than Mercury Systems. It trades about 0.31 of its potential returns per unit of risk. Mercury Systems is currently generating about 0.09 per unit of risk. If you would invest  10,751  in BWX Technologies on May 7, 2025 and sell it today you would earn a total of  4,700  from holding BWX Technologies or generate 43.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BWX Technologies  vs.  Mercury Systems

BWX Technologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BWX Technologies are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, BWX Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mercury Systems

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mercury Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BWX Technologies and Mercury Systems

The main advantage of trading using opposite BWX Technologies and Mercury Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BWX Technologies position performs unexpectedly, Mercury Systems 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 Mercury Systems will offset losses from the drop in Mercury Systems' long position.

The idea behind BWX Technologies and Mercury Systems 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.