Correlation Between CBAK Energy and Babcock Wilcox

Can any of the company-specific risk be diversified away by investing in both CBAK Energy and Babcock Wilcox 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 CBAK Energy and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CBAK Energy Technology and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on CBAK Energy and Babcock Wilcox 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 CBAK Energy with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBAK Energy and Babcock Wilcox.

Diversification Opportunities for CBAK Energy and Babcock Wilcox

0.07

Correlation Coefficient

CBAK Energy  Babcock Wilcox

Significant diversification

The 3 months correlation between CBAK and Babcock is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CBAK Energy Technology and Babcock Wilcox Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter and CBAK Energy 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 CBAK Energy Technology are associated (or correlated) with Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of CBAK Energy i.e., CBAK Energy and Babcock Wilcox go up and down completely randomly.

Pair Corralation between CBAK Energy and Babcock Wilcox

Given the investment horizon of 90 days CBAK Energy Technology is expected to generate 0.49 times more return on investment than Babcock Wilcox. However, CBAK Energy Technology is 2.03 times less risky than Babcock Wilcox. It trades about 0.01 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.05 per unit of risk. If you would invest  123.00  in CBAK Energy Technology on February 6, 2024 and sell it today you would lose (10.00) from holding CBAK Energy Technology or give up 8.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

CBAK Energy Technology  vs.  Babcock Wilcox Enterprises

CBAK Energy Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CBAK Energy Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CBAK Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Babcock Wilcox Enter

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Babcock Wilcox showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CBAK Energy and Babcock Wilcox

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

The idea behind CBAK Energy Technology and Babcock Wilcox Enterprises 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.