Correlation Between Barnes and Gorman Rupp

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

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

Diversification Opportunities for Barnes and Gorman Rupp

0.07

Correlation Coefficient

Barnes  Gorman Rupp

Significant diversification

The 3 months correlation between Barnes and Gorman is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Gorman Rupp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gorman Rupp 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 Gorman Rupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gorman Rupp has no effect on the direction of Barnes i.e., Barnes and Gorman Rupp go up and down completely randomly.

Pair Corralation between Barnes and Gorman Rupp

Taking into account the 90-day investment horizon Barnes is expected to generate 1.61 times less return on investment than Gorman Rupp. In addition to that, Barnes is 1.26 times more volatile than Gorman Rupp. It trades about 0.02 of its total potential returns per unit of risk. Gorman Rupp is currently generating about 0.05 per unit of volatility. If you would invest  2,600  in Gorman Rupp on October 11, 2024 and sell it today you would earn a total of  1,120  from holding Gorman Rupp or generate 43.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Barnes Group  vs.  Gorman Rupp

Barnes Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. 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.

Gorman Rupp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gorman Rupp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gorman Rupp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Barnes and Gorman Rupp

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

The idea behind Barnes Group and Gorman Rupp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.