Correlation Between Babcock Wilcox and Bloom Energy

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Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Bloom Energy 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 Bloom Energy 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 Bloom Energy Corp, you can compare the effects of market volatilities on Babcock Wilcox and Bloom Energy 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 Bloom Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Bloom Energy.

Diversification Opportunities for Babcock Wilcox and Bloom Energy

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Babcock and Bloom is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Bloom Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloom Energy Corp 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 Bloom Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloom Energy Corp has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Bloom Energy go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Bloom Energy

Allowing for the 90-day total investment horizon Babcock Wilcox is expected to generate 2.14 times less return on investment than Bloom Energy. In addition to that, Babcock Wilcox is 2.74 times more volatile than Bloom Energy Corp. It trades about 0.04 of its total potential returns per unit of risk. Bloom Energy Corp is currently generating about 0.21 per unit of volatility. If you would invest  932.00  in Bloom Energy Corp on December 29, 2023 and sell it today you would earn a total of  171.00  from holding Bloom Energy Corp or generate 18.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Babcock Wilcox Enterprises  vs.  Bloom Energy Corp

 Performance 
       Timeline  
Babcock Wilcox Enter 

Risk-Adjusted Performance

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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 weak basic indicators, Babcock Wilcox may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Bloom Energy Corp 

Risk-Adjusted Performance

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Low
 
High
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 abnormal 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 and Bloom Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Babcock Wilcox and Bloom Energy

The main advantage of trading using opposite Babcock Wilcox and Bloom Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Bloom Energy 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 Bloom Energy will offset losses from the drop in Bloom Energy's long position.
The idea behind Babcock Wilcox Enterprises and Bloom Energy Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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