Correlation Between BWX Technologies and Singapore Technologies

Can any of the company-specific risk be diversified away by investing in both BWX Technologies and Singapore Technologies 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 BWX Technologies and Singapore Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BWX Technologies and Singapore Technologies Engineering, you can compare the effects of market volatilities on BWX Technologies and Singapore Technologies 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 BWX Technologies with a short position of Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of BWX Technologies and Singapore Technologies.

Diversification Opportunities for BWX Technologies and Singapore Technologies

0.71

Correlation Coefficient

BWX Technologies  Singapore Technologies

Poor diversification

The 3 months correlation between BWX and Singapore is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BWX Technologies and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies and BWX Technologies 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 BWX Technologies are associated (or correlated) with Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of BWX Technologies i.e., BWX Technologies and Singapore Technologies go up and down completely randomly.

Pair Corralation between BWX Technologies and Singapore Technologies

Given the investment horizon of 90 days BWX Technologies is expected to generate 1.58 times more return on investment than Singapore Technologies. However, BWX Technologies is 1.58 times more volatile than Singapore Technologies Engineering. It trades about -0.06 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about -0.22 per unit of risk. If you would invest  12,627  in BWX Technologies on September 12, 2024 and sell it today you would lose (343.00) from holding BWX Technologies or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

BWX Technologies  vs.  Singapore Technologies Enginee

BWX Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BWX Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, BWX Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Singapore Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Technologies Engineering are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Singapore Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BWX Technologies and Singapore Technologies

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

The idea behind BWX Technologies and Singapore Technologies Engineering 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.