Correlation Between Babcock Wilcox and Acuity Brands
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Acuity Brands 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 Babcock Wilcox and Acuity Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Babcock Wilcox Enterprises and Acuity Brands, you can compare the effects of market volatilities on Babcock Wilcox and Acuity Brands 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 Babcock Wilcox with a short position of Acuity Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Acuity Brands.
Diversification Opportunities for Babcock Wilcox and Acuity Brands
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Babcock and Acuity is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Acuity Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acuity Brands and Babcock Wilcox 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 Babcock Wilcox Enterprises are associated (or correlated) with Acuity Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acuity Brands has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Acuity Brands go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Acuity Brands
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Acuity Brands. In addition to that, Babcock Wilcox is 5.11 times more volatile than Acuity Brands. It trades about -0.07 of its total potential returns per unit of risk. Acuity Brands is currently generating about 0.21 per unit of volatility. If you would invest 16,106 in Acuity Brands on December 29, 2023 and sell it today you would earn a total of 10,767 from holding Acuity Brands or generate 66.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Babcock Wilcox Enterprises vs. Acuity Brands
Performance |
Timeline |
Babcock Wilcox Enter |
Acuity Brands |
Babcock Wilcox and Acuity Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Babcock Wilcox and Acuity Brands
The main advantage of trading using opposite Babcock Wilcox and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Acuity Brands 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 Acuity Brands will offset losses from the drop in Acuity Brands' long position.Babcock Wilcox vs. Barnes Group | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. General Electric | Babcock Wilcox vs. Hillenbrand |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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