Correlation Between Babcock Wilcox and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Illinois Tool 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 Illinois Tool 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 Illinois Tool Works, you can compare the effects of market volatilities on Babcock Wilcox and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Illinois Tool.
Diversification Opportunities for Babcock Wilcox and Illinois Tool
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Babcock and Illinois is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Illinois Tool go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Illinois Tool
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Illinois Tool. In addition to that, Babcock Wilcox is 6.2 times more volatile than Illinois Tool Works. It trades about -0.15 of its total potential returns per unit of risk. Illinois Tool Works is currently generating about -0.5 per unit of volatility. If you would invest 26,523 in Illinois Tool Works on February 1, 2024 and sell it today you would lose (2,112) from holding Illinois Tool Works or give up 7.96% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Babcock Wilcox Enterprises vs. Illinois Tool Works
Performance |
Timeline |
Babcock Wilcox Enter |
Illinois Tool Works |
Babcock Wilcox and Illinois Tool Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Babcock Wilcox and Illinois Tool
The main advantage of trading using opposite Babcock Wilcox and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.Babcock Wilcox vs. Enerpac Tool Group | Babcock Wilcox vs. Gorman Rupp | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Franklin Electric Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
Content Syndication Quickly integrate customizable finance content to your own investment portal |