Correlation Between Luxfer Holdings and Barnes

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

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

Diversification Opportunities for Luxfer Holdings and Barnes

0.55

Correlation Coefficient

Luxfer Holdings  Barnes

Very weak diversification

The 3 months correlation between Luxfer and Barnes is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Luxfer Holdings 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 Luxfer Holdings PLC 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 Luxfer Holdings i.e., Luxfer Holdings and Barnes go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Barnes

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to under-perform the Barnes. In addition to that, Luxfer Holdings is 29.03 times more volatile than Barnes Group. It trades about -0.07 of its total potential returns per unit of risk. Barnes Group is currently generating about 0.34 per unit of volatility. If you would invest  4,726  in Barnes Group on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Barnes Group or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.0%
Values	Daily Returns

Luxfer Holdings PLC  vs.  Barnes Group

Luxfer Holdings PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luxfer Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

Pair Trading with Luxfer Holdings and Barnes

The main advantage of trading using opposite Luxfer Holdings and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luxfer Holdings 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 Luxfer Holdings PLC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.