Correlation Between Barnes and GMS
Can any of the company-specific risk be diversified away by investing in both Barnes and GMS 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 GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and GMS Inc, you can compare the effects of market volatilities on Barnes and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and GMS.
Diversification Opportunities for Barnes and GMS
Poor diversification
The 3 months correlation between Barnes and GMS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Barnes i.e., Barnes and GMS go up and down completely randomly.
Pair Corralation between Barnes and GMS
Taking into account the 90-day investment horizon Barnes Group is expected to generate 1.22 times more return on investment than GMS. However, Barnes is 1.22 times more volatile than GMS Inc. It trades about 0.17 of its potential returns per unit of risk. GMS Inc is currently generating about 0.14 per unit of risk. If you would invest 4,041 in Barnes Group on August 30, 2024 and sell it today you would earn a total of 645.00 from holding Barnes Group or generate 15.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnes Group vs. GMS Inc
Performance |
| Timeline |
| Barnes Group |
| GMS Inc |
Barnes and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnes and GMS
The main advantage of trading using opposite Barnes and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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