Correlation Between Babcock Wilcox and Oxford Lane

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

Diversification Opportunities for Babcock Wilcox and Oxford Lane

-0.1

Correlation Coefficient

Babcock Wilcox  Oxford Lane

Good diversification

The 3 months correlation between Babcock and Oxford is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises and Oxford Lane Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Lane Capital 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 Oxford Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Lane Capital has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Oxford Lane go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Oxford Lane

Given the investment horizon of 90 days Babcock Wilcox Enterprises is expected to generate 2.74 times more return on investment than Oxford Lane. However, Babcock Wilcox is 2.74 times more volatile than Oxford Lane Capital. It trades about 0.04 of its potential returns per unit of risk. Oxford Lane Capital is currently generating about -0.11 per unit of risk. If you would invest  2,043  in Babcock Wilcox Enterprises on September 19, 2024 and sell it today you would earn a total of  54.00  from holding Babcock Wilcox Enterprises or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  Oxford Lane Capital

Babcock Wilcox Enter

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Babcock Wilcox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oxford Lane Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oxford Lane Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Oxford Lane is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Babcock Wilcox and Oxford Lane

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

The idea behind Babcock Wilcox Enterprises and Oxford Lane Capital 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..