Correlation Between Loma Negra and Babcock Wilcox

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

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

Diversification Opportunities for Loma Negra and Babcock Wilcox

0.64

Correlation Coefficient

Loma Negra  Babcock Wilcox

Poor diversification

The 3 months correlation between Loma and Babcock is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Loma Negra Compania 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 Loma Negra 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 Loma Negra Compania 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 Loma Negra i.e., Loma Negra and Babcock Wilcox go up and down completely randomly.

Pair Corralation between Loma Negra and Babcock Wilcox

Given the investment horizon of 90 days Loma Negra Compania is expected to generate 3.15 times more return on investment than Babcock Wilcox. However, Loma Negra is 3.15 times more volatile than Babcock Wilcox Enterprises,. It trades about 0.32 of its potential returns per unit of risk. Babcock Wilcox Enterprises, is currently generating about 0.24 per unit of risk. If you would invest  706.00  in Loma Negra Compania on August 31, 2024 and sell it today you would earn a total of  436.00  from holding Loma Negra Compania or generate 61.76% return on investment over 90 days.

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

Loma Negra Compania  vs.  Babcock Wilcox Enterprises,

Loma Negra Compania

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loma Negra Compania are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Loma Negra sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Loma Negra and Babcock Wilcox

The main advantage of trading using opposite Loma Negra and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loma Negra 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 Loma Negra Compania 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.