Correlation Between Barnes and Rockwell Automation

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

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

Diversification Opportunities for Barnes and Rockwell Automation

0.57

Correlation Coefficient

Barnes  Rockwell Automation

Very weak diversification

The 3 months correlation between Barnes and Rockwell is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation 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 Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of Barnes i.e., Barnes and Rockwell Automation go up and down completely randomly.

Pair Corralation between Barnes and Rockwell Automation

Taking into account the 90-day investment horizon Barnes is expected to generate 3.13 times less return on investment than Rockwell Automation. But when comparing it to its historical volatility, Barnes Group is 14.53 times less risky than Rockwell Automation. It trades about 0.43 of its potential returns per unit of risk. Rockwell Automation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  28,313  in Rockwell Automation on September 18, 2024 and sell it today you would earn a total of  846.00  from holding Rockwell Automation or generate 2.99% return on investment over 90 days.

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

Barnes Group  vs.  Rockwell Automation

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.

Rockwell Automation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Rockwell Automation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barnes and Rockwell Automation

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

The idea behind Barnes Group and Rockwell Automation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.