Correlation Between Gates Industrial and Barnes

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

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

Diversification Opportunities for Gates Industrial and Barnes

0.45

Correlation Coefficient

Gates Industrial  Barnes

Very weak diversification

The 3 months correlation between Gates and Barnes is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gates Industrial and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Gates Industrial 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 Gates Industrial are associated (or correlated) with Barnes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Group has no effect on the direction of Gates Industrial i.e., Gates Industrial and Barnes go up and down completely randomly.

Pair Corralation between Gates Industrial and Barnes

Given the investment horizon of 90 days Gates Industrial is expected to under-perform the Barnes. In addition to that, Gates Industrial is 19.44 times more volatile than Barnes Group. It trades about -0.23 of its total potential returns per unit of risk. Barnes Group is currently generating about 0.23 per unit of volatility. If you would invest  4,700  in Barnes Group on October 5, 2024 and sell it today you would earn a total of  18.00  from holding Barnes Group or generate 0.38% return on investment over 90 days.

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

Gates Industrial  vs.  Barnes Group

Gates Industrial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gates Industrial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Gates Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Barnes Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Gates Industrial and Barnes

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

The idea behind Gates Industrial and Barnes 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.