Correlation Between Babcock Wilcox and Flux Power

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

Diversification Opportunities for Babcock Wilcox and Flux Power

0.15

Correlation Coefficient

Babcock Wilcox  Flux Power

Average diversification

The 3 months correlation between Babcock and Flux is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Flux Power Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flux Power Holdings 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 Flux Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flux Power Holdings has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Flux Power go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Flux Power

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Flux Power. In addition to that, Babcock Wilcox is 1.29 times more volatile than Flux Power Holdings. It trades about -0.04 of its total potential returns per unit of risk. Flux Power Holdings is currently generating about 0.04 per unit of volatility. If you would invest  319.00  in Flux Power Holdings on January 27, 2024 and sell it today you would earn a total of  122.00  from holding Flux Power Holdings or generate 38.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.77%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Flux Power Holdings

Babcock Wilcox Enter

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Flux Power Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flux Power Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Flux Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Babcock Wilcox and Flux Power

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

The idea behind Babcock Wilcox Enterprises and Flux Power Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.