Correlation Between B Riley and Babcock Wilcox

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Can any of the company-specific risk be diversified away by investing in both B Riley 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 B Riley and Babcock Wilcox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between B Riley Financial and Babcock Wilcox Enterprises, you can compare the effects of market volatilities on B Riley 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 B Riley with a short position of Babcock Wilcox. Check out your portfolio center. Please also check ongoing floating volatility patterns of B Riley and Babcock Wilcox.

Diversification Opportunities for B Riley and Babcock Wilcox

RILYZBabcockDiversified AwayRILYZBabcockDiversified Away100%
0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between RILYZ and Babcock is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding B Riley Financial 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 B Riley 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 B Riley Financial 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 B Riley i.e., B Riley and Babcock Wilcox go up and down completely randomly.

Pair Corralation between B Riley and Babcock Wilcox

Assuming the 90 days horizon B Riley Financial is expected to generate 3.6 times more return on investment than Babcock Wilcox. However, B Riley is 3.6 times more volatile than Babcock Wilcox Enterprises. It trades about 0.03 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.04 per unit of risk. If you would invest  913.00  in B Riley Financial on September 24, 2024 and sell it today you would earn a total of  7.00  from holding B Riley Financial or generate 0.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

B Riley Financial  vs.  Babcock Wilcox Enterprises

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-1001020
JavaScript chart by amCharts 3.21.15RILYZ BWNB
       Timeline  
B Riley Financial 

Risk-Adjusted Performance

2 of 100

 
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Weak
Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, B Riley may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec7891011
Babcock Wilcox Enter 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Babcock Wilcox Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2020.52121.522

B Riley and Babcock Wilcox Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-15.25-11.42-7.59-3.770.03.727.5811.4315.2919.14 0.050.100.150.20
JavaScript chart by amCharts 3.21.15RILYZ BWNB
       Returns  

Pair Trading with B Riley and Babcock Wilcox

The main advantage of trading using opposite B Riley and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B Riley 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 B Riley Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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