Correlation Between Barnes and NL Industries
Can any of the company-specific risk be diversified away by investing in both Barnes and NL Industries 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 NL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and NL Industries, you can compare the effects of market volatilities on Barnes and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and NL Industries.
Diversification Opportunities for Barnes and NL Industries
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Barnes and NL Industries is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Barnes i.e., Barnes and NL Industries go up and down completely randomly.
Pair Corralation between Barnes and NL Industries
Taking into account the 90-day investment horizon Barnes is expected to generate 1.13 times less return on investment than NL Industries. But when comparing it to its historical volatility, Barnes Group is 1.16 times less risky than NL Industries. It trades about 0.03 of its potential returns per unit of risk. NL Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 619.00 in NL Industries on November 19, 2024 and sell it today you would earn a total of 103.00 from holding NL Industries or generate 16.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.77% |
| Values | Daily Returns |
Barnes Group vs. NL Industries
Performance |
| Timeline |
| Barnes Group |
Risk-Adjusted Performance
Strong
Weak | Strong |
| NL Industries |
Barnes and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnes and NL Industries
The main advantage of trading using opposite Barnes and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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