Correlation Between Barrett Business and ManpowerGroup

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

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

Diversification Opportunities for Barrett Business and ManpowerGroup

0.4

Correlation Coefficient

Barrett Business  ManpowerGroup

Very weak diversification

The 3 months correlation between Barrett and ManpowerGroup is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Barrett Business Services and ManpowerGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ManpowerGroup and Barrett Business 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 Barrett Business Services are associated (or correlated) with ManpowerGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ManpowerGroup has no effect on the direction of Barrett Business i.e., Barrett Business and ManpowerGroup go up and down completely randomly.

Pair Corralation between Barrett Business and ManpowerGroup

Given the investment horizon of 90 days Barrett Business Services is expected to generate 0.56 times more return on investment than ManpowerGroup. However, Barrett Business Services is 1.79 times less risky than ManpowerGroup. It trades about -0.05 of its potential returns per unit of risk. ManpowerGroup is currently generating about -0.05 per unit of risk. If you would invest  4,170  in Barrett Business Services on January 12, 2025 and sell it today you would lose (186.00) from holding Barrett Business Services or give up 4.46% of portfolio value over 90 days.

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

Barrett Business Services  vs.  ManpowerGroup

Barrett Business Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barrett Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Barrett Business is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

ManpowerGroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days ManpowerGroup 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Barrett Business and ManpowerGroup

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

The idea behind Barrett Business Services and ManpowerGroup 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.