Correlation Between Barnes and A2Z Smart

Can any of the company-specific risk be diversified away by investing in both Barnes and A2Z Smart 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 A2Z Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barnes Group and A2Z Smart Technologies, you can compare the effects of market volatilities on Barnes and A2Z Smart 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 A2Z Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and A2Z Smart.

Diversification Opportunities for Barnes and A2Z Smart

0.75

Correlation Coefficient

Barnes  A2Z Smart

Poor diversification

The 3 months correlation between Barnes and A2Z is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and A2Z Smart Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A2Z Smart Technologies 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 A2Z Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A2Z Smart Technologies has no effect on the direction of Barnes i.e., Barnes and A2Z Smart go up and down completely randomly.

Pair Corralation between Barnes and A2Z Smart

Taking into account the 90-day investment horizon Barnes is expected to generate 11.78 times less return on investment than A2Z Smart. But when comparing it to its historical volatility, Barnes Group is 29.24 times less risky than A2Z Smart. It trades about 0.39 of its potential returns per unit of risk. A2Z Smart Technologies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  665.00  in A2Z Smart Technologies on September 20, 2024 and sell it today you would earn a total of  65.00  from holding A2Z Smart Technologies or generate 9.77% return on investment over 90 days.

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

Barnes Group  vs.  A2Z Smart Technologies

Barnes Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 12 (%) 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.

A2Z Smart Technologies

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in A2Z Smart Technologies are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, A2Z Smart showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barnes and A2Z Smart

The main advantage of trading using opposite Barnes and A2Z Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, A2Z Smart 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 A2Z Smart will offset losses from the drop in A2Z Smart's long position.

The idea behind Barnes Group and A2Z Smart Technologies 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.