Correlation Between Babcock Wilcox and Watts Water
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Watts Water 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 Watts Water 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 Watts Water Technologies, you can compare the effects of market volatilities on Babcock Wilcox and Watts Water 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 Watts Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Watts Water.
Diversification Opportunities for Babcock Wilcox and Watts Water
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Babcock and Watts is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Watts Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watts Water Technologies 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 Watts Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watts Water Technologies has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Watts Water go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Watts Water
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Watts Water. In addition to that, Babcock Wilcox is 4.17 times more volatile than Watts Water Technologies. It trades about -0.1 of its total potential returns per unit of risk. Watts Water Technologies is currently generating about -0.12 per unit of volatility. If you would invest 20,605 in Watts Water Technologies on February 2, 2024 and sell it today you would lose (610.00) from holding Watts Water Technologies or give up 2.96% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
Babcock Wilcox Enterprises vs. Watts Water Technologies
Performance |
Timeline |
Babcock Wilcox Enter |
Watts Water Technologies |
Babcock Wilcox and Watts Water Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Babcock Wilcox and Watts Water
The main advantage of trading using opposite Babcock Wilcox and Watts Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox position performs unexpectedly, Watts Water 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 Watts Water will offset losses from the drop in Watts Water's long position.Babcock Wilcox vs. Illinois Tool Works | Babcock Wilcox vs. Pentair PLC | Babcock Wilcox vs. Emerson Electric | Babcock Wilcox vs. Smith AO |
Watts Water vs. Illinois Tool Works | Watts Water vs. Pentair PLC | Watts Water vs. Emerson Electric | Watts Water vs. Smith AO |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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