Correlation Between New Horizon and BWX Technologies

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

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

Diversification Opportunities for New Horizon and BWX Technologies

-0.69

Correlation Coefficient

New Horizon  BWX Technologies

Excellent diversification

The 3 months correlation between New and BWX is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding New Horizon Aircraft and BWX Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BWX Technologies and New Horizon 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 New Horizon Aircraft are associated (or correlated) with BWX Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BWX Technologies has no effect on the direction of New Horizon i.e., New Horizon and BWX Technologies go up and down completely randomly.

Pair Corralation between New Horizon and BWX Technologies

Assuming the 90 days horizon New Horizon Aircraft is expected to generate 11.3 times more return on investment than BWX Technologies. However, New Horizon is 11.3 times more volatile than BWX Technologies. It trades about 0.08 of its potential returns per unit of risk. BWX Technologies is currently generating about 0.26 per unit of risk. If you would invest  2.50  in New Horizon Aircraft on September 1, 2024 and sell it today you would lose (0.31) from holding New Horizon Aircraft or give up 12.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.06%
Values	Daily Returns

New Horizon Aircraft  vs.  BWX Technologies

New Horizon Aircraft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, New Horizon showed solid returns over the last few months and may actually be approaching a breakup point.

BWX Technologies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BWX Technologies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, BWX Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Horizon and BWX Technologies

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

The idea behind New Horizon Aircraft and BWX Technologies 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.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.