Correlation Between Balfour Beatty and BCB Bancorp

Can any of the company-specific risk be diversified away by investing in both Balfour Beatty and BCB Bancorp 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 Balfour Beatty and BCB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balfour Beatty plc and BCB Bancorp, you can compare the effects of market volatilities on Balfour Beatty and BCB Bancorp 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 Balfour Beatty with a short position of BCB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balfour Beatty and BCB Bancorp.

Diversification Opportunities for Balfour Beatty and BCB Bancorp

-0.2

Correlation Coefficient

Balfour Beatty  BCB Bancorp

Good diversification

The 3 months correlation between Balfour and BCB is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp and Balfour Beatty 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 Balfour Beatty plc are associated (or correlated) with BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of Balfour Beatty i.e., Balfour Beatty and BCB Bancorp go up and down completely randomly.

Pair Corralation between Balfour Beatty and BCB Bancorp

Assuming the 90 days horizon Balfour Beatty plc is expected to under-perform the BCB Bancorp. In addition to that, Balfour Beatty is 2.8 times more volatile than BCB Bancorp. It trades about -0.05 of its total potential returns per unit of risk. BCB Bancorp is currently generating about -0.07 per unit of volatility. If you would invest  1,325  in BCB Bancorp on September 18, 2024 and sell it today you would lose (34.00) from holding BCB Bancorp or give up 2.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Balfour Beatty plc  vs.  BCB Bancorp

Balfour Beatty plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Balfour Beatty plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Balfour Beatty is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BCB Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, BCB Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Balfour Beatty and BCB Bancorp

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

The idea behind Balfour Beatty plc and BCB Bancorp 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.