Correlation Between US Nuclear and Babcock Wilcox

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

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

Diversification Opportunities for US Nuclear and Babcock Wilcox

0.4

Correlation Coefficient

US Nuclear  Babcock Wilcox

Very weak diversification

The 3 months correlation between UCLE and Babcock is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding US Nuclear Corp 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 US Nuclear 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 US Nuclear Corp 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 US Nuclear i.e., US Nuclear and Babcock Wilcox go up and down completely randomly.

Pair Corralation between US Nuclear and Babcock Wilcox

Given the investment horizon of 90 days US Nuclear Corp is expected to generate 8.4 times more return on investment than Babcock Wilcox. However, US Nuclear is 8.4 times more volatile than Babcock Wilcox Enterprises. It trades about 0.19 of its potential returns per unit of risk. Babcock Wilcox Enterprises is currently generating about -0.01 per unit of risk. If you would invest  1.20  in US Nuclear Corp on September 27, 2024 and sell it today you would earn a total of  6.30  from holding US Nuclear Corp or generate 525.0% return on investment over 90 days.

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

US Nuclear Corp  vs.  Babcock Wilcox Enterprises

US Nuclear Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Nuclear Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, US Nuclear exhibited solid returns over the last few months and may actually be approaching a breakup point.

Babcock Wilcox Enter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Babcock Wilcox Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Babcock Wilcox is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with US Nuclear and Babcock Wilcox

The main advantage of trading using opposite US Nuclear and Babcock Wilcox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Nuclear 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 US Nuclear Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.