Correlation Between Barnes and Watsco
Can any of the company-specific risk be diversified away by investing in both Barnes and Watsco 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 Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and Watsco Inc, you can compare the effects of market volatilities on Barnes and Watsco 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 Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Watsco.
Diversification Opportunities for Barnes and Watsco
Very good diversification
The 3 months correlation between Barnes and Watsco is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco 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 Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of Barnes i.e., Barnes and Watsco go up and down completely randomly.
Pair Corralation between Barnes and Watsco
Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.07 times more return on investment than Watsco. However, Barnes Group is 15.13 times less risky than Watsco. It trades about 0.34 of its potential returns per unit of risk. Watsco Inc is currently generating about -0.25 per unit of risk. If you would invest 4,690 in Barnes Group on October 26, 2024 and sell it today you would earn a total of 58.00 from holding Barnes Group or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnes Group vs. Watsco Inc
Performance |
| Timeline |
| Barnes Group |
| Watsco Inc |
Barnes and Watsco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnes and Watsco
The main advantage of trading using opposite Barnes and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Watsco 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 Watsco will offset losses from the drop in Watsco's long position.| Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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