Correlation Between Barnes and Li Bang

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

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

Diversification Opportunities for Barnes and Li Bang

0.46

Correlation Coefficient

Barnes  Li Bang

Very weak diversification

The 3 months correlation between Barnes and LBGJ is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Li Bang International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Bang International 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 Li Bang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Bang International has no effect on the direction of Barnes i.e., Barnes and Li Bang go up and down completely randomly.

Pair Corralation between Barnes and Li Bang

Taking into account the 90-day investment horizon Barnes is expected to generate 14.27 times less return on investment than Li Bang. But when comparing it to its historical volatility, Barnes Group is 109.71 times less risky than Li Bang. It trades about 0.42 of its potential returns per unit of risk. Li Bang International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  319.00  in Li Bang International on September 18, 2024 and sell it today you would lose (1.00) from holding Li Bang International or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Barnes Group  vs.  Li Bang International

Barnes Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 14 (%) 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.

Li Bang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Bang International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in January 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Pair Trading with Barnes and Li Bang

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

The idea behind Barnes Group and Li Bang International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.