Correlation Between Bloom Energy and Babcock Wilcox

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Can any of the company-specific risk be diversified away by investing in both Bloom Energy 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 Bloom Energy and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bloom Energy Corp and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on Bloom Energy 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 Bloom Energy with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloom Energy and Babcock Wilcox.

Diversification Opportunities for Bloom Energy and Babcock Wilcox

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bloom and Babcock is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bloom Energy Corp 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 Bloom Energy 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 Bloom Energy Corp 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 Bloom Energy i.e., Bloom Energy and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Bloom Energy and Babcock Wilcox

Allowing for the 90-day total investment horizon Bloom Energy Corp is expected to generate 0.55 times more return on investment than Babcock Wilcox. However, Bloom Energy Corp is 1.82 times less risky than Babcock Wilcox. It trades about -0.03 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.05 per unit of risk. If you would invest  1,905  in Bloom Energy Corp on December 30, 2023 and sell it today you would lose (781.00) from holding Bloom Energy Corp or give up 41.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bloom Energy Corp  vs.  Babcock Wilcox Enterprises

 Performance 
       Timeline  
Bloom Energy Corp 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Bloom Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Babcock Wilcox Enter 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Babcock Wilcox Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bloom Energy and Babcock Wilcox Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bloom Energy and Babcock Wilcox

The main advantage of trading using opposite Bloom Energy and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bloom Energy 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 Bloom Energy Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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