Correlation Between Barnes and American Superconductor

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

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

Diversification Opportunities for Barnes and American Superconductor

0.59

Correlation Coefficient

Barnes  American Superconductor

Very weak diversification

The 3 months correlation between Barnes and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and American Superconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Superconductor and Barnes 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 Barnes Group are associated (or correlated) with American Superconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Superconductor has no effect on the direction of Barnes i.e., Barnes and American Superconductor go up and down completely randomly.

Pair Corralation between Barnes and American Superconductor

Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.02 times more return on investment than American Superconductor. However, Barnes Group is 46.72 times less risky than American Superconductor. It trades about 0.27 of its potential returns per unit of risk. American Superconductor is currently generating about -0.23 per unit of risk. If you would invest  4,669  in Barnes Group on September 12, 2024 and sell it today you would earn a total of  31.00  from holding Barnes Group or generate 0.66% return on investment over 90 days.

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

Barnes Group  vs.  American Superconductor

Barnes Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

American Superconductor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Superconductor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Superconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barnes and American Superconductor

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

The idea behind Barnes Group and American Superconductor 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.