Correlation Between Babcock Wilcox and B Riley

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

Diversification Opportunities for Babcock Wilcox and B Riley

0.2

Correlation Coefficient

Babcock Wilcox  B Riley

Modest diversification

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

Pair Corralation between Babcock Wilcox and B Riley

Given the investment horizon of 90 days Babcock Wilcox is expected to generate 1.46 times less return on investment than B Riley. But when comparing it to its historical volatility, Babcock Wilcox Enterprises is 4.19 times less risky than B Riley. It trades about 0.04 of its potential returns per unit of risk. B Riley Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  951.00  in B Riley Financial on September 19, 2024 and sell it today you would lose (26.00) from holding B Riley Financial or give up 2.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Babcock Wilcox Enterprises  vs.  B Riley Financial

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.

B Riley Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, B Riley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Babcock Wilcox and B Riley

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

The idea behind Babcock Wilcox Enterprises and B Riley Financial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.