Correlation Between Barnes and MSA Safety

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

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

Diversification Opportunities for Barnes and MSA Safety

-0.72

Correlation Coefficient

Barnes  MSA Safety

Pay attention - limited upside

The 3 months correlation between Barnes and MSA is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and MSA Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSA Safety 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 MSA Safety. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSA Safety has no effect on the direction of Barnes i.e., Barnes and MSA Safety go up and down completely randomly.

Pair Corralation between Barnes and MSA Safety

Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.07 times more return on investment than MSA Safety. However, Barnes Group is 14.76 times less risky than MSA Safety. It trades about 0.39 of its potential returns per unit of risk. MSA Safety is currently generating about -0.14 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 Against
Strength	Weak
Accuracy	33.33%
Values	Daily Returns

Barnes Group  vs.  MSA Safety

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.

MSA Safety

Risk-Adjusted Performance

Very Weak

Over the last 90 days MSA Safety has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Barnes and MSA Safety

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

The idea behind Barnes Group and MSA Safety 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.