Correlation Between Cemex SAB and Babcock Wilcox

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

By analyzing existing cross correlation between Cemex SAB de and Babcock Wilcox Enterprises,, you can compare the effects of market volatilities on Cemex SAB and Babcock Wilcox 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 Cemex SAB with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cemex SAB and Babcock Wilcox.

Diversification Opportunities for Cemex SAB and Babcock Wilcox

-0.26

Correlation Coefficient

Cemex SAB  Babcock Wilcox

Very good diversification

The 3 months correlation between Cemex and Babcock is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cemex SAB de and Babcock Wilcox Enterprises, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock Wilcox Enter and Cemex SAB 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 Cemex SAB de are associated (or correlated) with Babcock Wilcox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock Wilcox Enter has no effect on the direction of Cemex SAB i.e., Cemex SAB and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Cemex SAB and Babcock Wilcox

Allowing for the 90-day total investment horizon Cemex SAB de is expected to under-perform the Babcock Wilcox. In addition to that, Cemex SAB is 3.13 times more volatile than Babcock Wilcox Enterprises,. It trades about -0.02 of its total potential returns per unit of risk. Babcock Wilcox Enterprises, is currently generating about 0.27 per unit of volatility. If you would invest  2,090  in Babcock Wilcox Enterprises, on September 2, 2024 and sell it today you would earn a total of  319.00  from holding Babcock Wilcox Enterprises, or generate 15.26% return on investment over 90 days.

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

Cemex SAB de  vs.  Babcock Wilcox Enterprises,

Cemex SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cemex SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cemex SAB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Babcock Wilcox Enter

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Babcock Wilcox Enterprises, are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Babcock Wilcox displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cemex SAB and Babcock Wilcox

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

The idea behind Cemex SAB de and Babcock Wilcox Enterprises, 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.