Correlation Between Barnes and Union Pacific
Can any of the company-specific risk be diversified away by investing in both Barnes and Union Pacific 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 Union Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and Union Pacific, you can compare the effects of market volatilities on Barnes and Union Pacific 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 Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Union Pacific.
Diversification Opportunities for Barnes and Union Pacific
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Barnes and Union is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Barnes i.e., Barnes and Union Pacific go up and down completely randomly.
Pair Corralation between Barnes and Union Pacific
Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.07 times more return on investment than Union Pacific. However, Barnes Group is 14.29 times less risky than Union Pacific. It trades about 0.05 of its potential returns per unit of risk. Union Pacific is currently generating about -0.01 per unit of risk. If you would invest 4,667 in Barnes Group on August 24, 2024 and sell it today you would earn a total of 7.00 from holding Barnes Group or generate 0.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnes Group vs. Union Pacific
Performance |
| Timeline |
| Barnes Group |
| Union Pacific |
Barnes and Union Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnes and Union Pacific
The main advantage of trading using opposite Barnes and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Union Pacific 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 Union Pacific will offset losses from the drop in Union Pacific's long position.| Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
| Union Pacific vs. Norfolk Southern | Union Pacific vs. CSX Corporation | Union Pacific vs. United Parcel Service | Union Pacific vs. Canadian National Railway |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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