Correlation Between Barnes and Crane

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

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

Diversification Opportunities for Barnes and Crane

0.38

Correlation Coefficient

Barnes  Crane

Weak diversification

The 3 months correlation between Barnes and Crane is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Crane Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crane Company 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 Crane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crane Company has no effect on the direction of Barnes i.e., Barnes and Crane go up and down completely randomly.

Pair Corralation between Barnes and Crane

Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.03 times more return on investment than Crane. However, Barnes Group is 31.43 times less risky than Crane. It trades about 0.39 of its potential returns per unit of risk. Crane Company is currently generating about 0.01 per unit of risk. If you would invest  4,720  in Barnes Group on December 26, 2024 and sell it today you would earn a total of  28.00  from holding Barnes Group or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	32.79%
Values	Daily Returns

Barnes Group  vs.  Crane Company

Barnes Group

Risk-Adjusted Performance

Very Strong

Over the last 90 days Barnes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Barnes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Crane Company

Risk-Adjusted Performance

Weak

Over the last 90 days Crane Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crane is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Barnes and Crane

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

The idea behind Barnes Group and Crane Company 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.