Correlation Between Babcock Wilcox and Harrow Health

Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox and Harrow Health 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 Harrow Health 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 Harrow Health 8625, you can compare the effects of market volatilities on Babcock Wilcox and Harrow Health 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 Harrow Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Harrow Health.

Diversification Opportunities for Babcock Wilcox and Harrow Health

0.84

Correlation Coefficient

Babcock Wilcox  Harrow Health

Very poor diversification

The 3 months correlation between Babcock and Harrow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises, and Harrow Health 8625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harrow Health 8625 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 Harrow Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harrow Health 8625 has no effect on the direction of Babcock Wilcox i.e., Babcock Wilcox and Harrow Health go up and down completely randomly.

Pair Corralation between Babcock Wilcox and Harrow Health

Given the investment horizon of 90 days Babcock Wilcox Enterprises, is expected to generate 2.88 times more return on investment than Harrow Health. However, Babcock Wilcox is 2.88 times more volatile than Harrow Health 8625. It trades about 0.24 of its potential returns per unit of risk. Harrow Health 8625 is currently generating about 0.11 per unit of risk. If you would invest  2,090  in Babcock Wilcox Enterprises, on August 31, 2024 and sell it today you would earn a total of  261.00  from holding Babcock Wilcox Enterprises, or generate 12.49% return on investment over 90 days.

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

Babcock Wilcox Enterprises,  vs.  Harrow Health 8625

Babcock Wilcox Enter

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises, are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Babcock Wilcox may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Harrow Health 8625

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harrow Health 8625 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Harrow Health is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Babcock Wilcox and Harrow Health

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

The idea behind Babcock Wilcox Enterprises, and Harrow Health 8625 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.