Correlation Between Li Bang and Barnes

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

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

Diversification Opportunities for Li Bang and Barnes

0.46

Correlation Coefficient

Li Bang  Barnes

Very weak diversification

The 3 months correlation between LBGJ and Barnes is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Li Bang International and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Li Bang 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 Li Bang International 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 Li Bang i.e., Li Bang and Barnes go up and down completely randomly.

Pair Corralation between Li Bang and Barnes

Given the investment horizon of 90 days Li Bang International is expected to generate 109.71 times more return on investment than Barnes. However, Li Bang is 109.71 times more volatile than Barnes Group. It trades about 0.06 of its potential returns per unit of risk. Barnes Group is currently generating about 0.42 per unit of risk. If you would invest  319.00  in Li Bang International on September 18, 2024 and sell it today you would lose (1.00) from holding Li Bang International or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Li Bang International  vs.  Barnes Group

Li Bang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Bang International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in January 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

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.

Pair Trading with Li Bang and Barnes

The main advantage of trading using opposite Li Bang and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Bang 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 Li Bang International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.