Correlation Between Babcock Wilcox and Parker Hannifin

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

Diversification Opportunities for Babcock Wilcox and Parker Hannifin

-0.21

Correlation Coefficient

Babcock Wilcox  Parker Hannifin

Very good diversification

The 3 months correlation between Babcock and Parker is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin 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 Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Parker Hannifin go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Parker Hannifin

Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Parker Hannifin. In addition to that, Babcock Wilcox is 4.3 times more volatile than Parker Hannifin. It trades about -0.01 of its total potential returns per unit of risk. Parker Hannifin is currently generating about 0.04 per unit of volatility. If you would invest  63,127  in Parker Hannifin on September 27, 2024 and sell it today you would earn a total of  2,130  from holding Parker Hannifin or generate 3.37% return on investment over 90 days.

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

Babcock Wilcox Enterprises  vs.  Parker Hannifin

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 fairly stable basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Parker Hannifin

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Parker Hannifin is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Babcock Wilcox and Parker Hannifin

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

The idea behind Babcock Wilcox Enterprises and Parker Hannifin 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.