Correlation Between Barnes and General Electric

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Can any of the company-specific risk be diversified away by investing in both Barnes and General Electric 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 Barnes and General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and General Electric, you can compare the effects of market volatilities on Barnes and General Electric 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 Barnes with a short position of General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and General Electric.

Diversification Opportunities for Barnes and General Electric

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Barnes and General is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and Barnes 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 Barnes Group are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Barnes i.e., Barnes and General Electric go up and down completely randomly.

Pair Corralation between Barnes and General Electric

Taking into account the 90-day investment horizon Barnes is expected to generate 2.71 times less return on investment than General Electric. In addition to that, Barnes is 1.13 times more volatile than General Electric. It trades about 0.15 of its total potential returns per unit of risk. General Electric is currently generating about 0.47 per unit of volatility. If you would invest  15,399  in General Electric on December 29, 2023 and sell it today you would earn a total of  2,613  from holding General Electric or generate 16.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Barnes Group  vs.  General Electric

 Performance 
       Timeline  
Barnes Group 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.
General Electric 

Risk-Adjusted Performance

35 of 100

 
Low
 
High
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

Barnes and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Barnes and General Electric

The main advantage of trading using opposite Barnes and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
The idea behind Barnes Group and General Electric 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.
Check out your portfolio center.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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