Correlation Between Babcock Wilcox and USD Partners

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

Diversification Opportunities for Babcock Wilcox and USD Partners

-0.8

Correlation Coefficient

Babcock Wilcox  USD Partners

Pay attention - limited upside

The 3 months correlation between Babcock and USD is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and USD Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USD Partners LP 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 USD Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USD Partners LP has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and USD Partners go up and down completely randomly.

Pair Corralation between Babcock Wilcox and USD Partners

If you would invest  110.00  in Babcock Wilcox Enterprises on September 3, 2024 and sell it today you would earn a total of  88.00  from holding Babcock Wilcox Enterprises or generate 80.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  USD Partners LP

Babcock Wilcox Enter

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Babcock Wilcox showed solid returns over the last few months and may actually be approaching a breakup point.

USD Partners LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USD Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, USD Partners is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Babcock Wilcox and USD Partners

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

The idea behind Babcock Wilcox Enterprises and USD Partners LP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.