Correlation Between Caldwell Partners and Barrett Business

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

By analyzing existing cross correlation between The Caldwell Partners and Barrett Business Services, you can compare the effects of market volatilities on Caldwell Partners and Barrett Business 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 Caldwell Partners with a short position of Barrett Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caldwell Partners and Barrett Business.

Diversification Opportunities for Caldwell Partners and Barrett Business

0.64

Correlation Coefficient

Caldwell Partners  Barrett Business

Poor diversification

The 3 months correlation between Caldwell and Barrett is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Caldwell Partners and Barrett Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrett Business Services and Caldwell Partners 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 The Caldwell Partners are associated (or correlated) with Barrett Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrett Business Services has no effect on the direction of Caldwell Partners i.e., Caldwell Partners and Barrett Business go up and down completely randomly.

Pair Corralation between Caldwell Partners and Barrett Business

Assuming the 90 days horizon The Caldwell Partners is expected to under-perform the Barrett Business. In addition to that, Caldwell Partners is 3.38 times more volatile than Barrett Business Services. It trades about -0.09 of its total potential returns per unit of risk. Barrett Business Services is currently generating about -0.06 per unit of volatility. If you would invest  4,326  in Barrett Business Services on December 30, 2024 and sell it today you would lose (205.00) from holding Barrett Business Services or give up 4.74% of portfolio value over 90 days.

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

The Caldwell Partners  vs.  Barrett Business Services

Caldwell Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Caldwell Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Barrett Business Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barrett Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Barrett Business is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Caldwell Partners and Barrett Business

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

The idea behind The Caldwell Partners and Barrett Business Services 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.