Correlation Between Tennant and Barnes

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

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

Diversification Opportunities for Tennant and Barnes

-0.58

Correlation Coefficient

Tennant  Barnes

Excellent diversification

The 3 months correlation between Tennant and Barnes is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Tennant 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 Tennant Company 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 Tennant i.e., Tennant and Barnes go up and down completely randomly.

Pair Corralation between Tennant and Barnes

Considering the 90-day investment horizon Tennant Company is expected to under-perform the Barnes. In addition to that, Tennant is 1.0 times more volatile than Barnes Group. It trades about -0.08 of its total potential returns per unit of risk. Barnes Group is currently generating about 0.19 per unit of volatility. If you would invest  3,803  in Barnes Group on September 17, 2024 and sell it today you would earn a total of  908.00  from holding Barnes Group or generate 23.88% return on investment over 90 days.

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

Tennant Company  vs.  Barnes Group

Tennant Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tennant Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 unsteady fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tennant and Barnes

The main advantage of trading using opposite Tennant and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tennant 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 Tennant Company 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.