Correlation Between Barnes and Otis Worldwide

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

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

Diversification Opportunities for Barnes and Otis Worldwide

0.91

Correlation Coefficient

Barnes  Otis Worldwide

Almost no diversification

The 3 months correlation between Barnes and Otis is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Otis Worldwide Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide Corp 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 Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide Corp has no effect on the direction of Barnes i.e., Barnes and Otis Worldwide go up and down completely randomly.

Pair Corralation between Barnes and Otis Worldwide

Taking into account the 90-day investment horizon Barnes is expected to generate 5.58 times less return on investment than Otis Worldwide. But when comparing it to its historical volatility, Barnes Group is 12.82 times less risky than Otis Worldwide. It trades about 0.39 of its potential returns per unit of risk. Otis Worldwide Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,315  in Otis Worldwide Corp on December 27, 2024 and sell it today you would earn a total of  954.00  from holding Otis Worldwide Corp or generate 10.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	31.67%
Values	Daily Returns

Barnes Group  vs.  Otis Worldwide Corp

Barnes Group

Risk-Adjusted Performance

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.

Otis Worldwide Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Otis Worldwide Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Otis Worldwide may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Barnes and Otis Worldwide

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

The idea behind Barnes Group and Otis Worldwide Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.