Correlation Between Barnes and Ladybug Resource

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

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

Diversification Opportunities for Barnes and Ladybug Resource

-0.43

Correlation Coefficient

Barnes  Ladybug Resource

Very good diversification

The 3 months correlation between Barnes and Ladybug is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Ladybug Resource Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladybug Resource 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 Ladybug Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladybug Resource has no effect on the direction of Barnes i.e., Barnes and Ladybug Resource go up and down completely randomly.

Pair Corralation between Barnes and Ladybug Resource

Taking into account the 90-day investment horizon Barnes is expected to generate 12.32 times less return on investment than Ladybug Resource. But when comparing it to its historical volatility, Barnes Group is 5.47 times less risky than Ladybug Resource. It trades about 0.03 of its potential returns per unit of risk. Ladybug Resource Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Ladybug Resource Group on September 30, 2024 and sell it today you would earn a total of  0.10  from holding Ladybug Resource Group or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barnes Group  vs.  Ladybug Resource Group

Barnes Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 11 (%) 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.

Ladybug Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ladybug Resource Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ladybug Resource is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Barnes and Ladybug Resource

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

The idea behind Barnes Group and Ladybug Resource Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.