Correlation Between Donaldson and Barnes
Can any of the company-specific risk be diversified away by investing in both Donaldson and Barnes 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 Donaldson and Barnes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Donaldson and Barnes Group, you can compare the effects of market volatilities on Donaldson and Barnes 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 Donaldson with a short position of Barnes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donaldson and Barnes.
Diversification Opportunities for Donaldson and Barnes
Poor diversification
The 3 months correlation between Donaldson and Barnes is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Donaldson and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Donaldson 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 Donaldson are associated (or correlated) with Barnes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barnes Group has no effect on the direction of Donaldson i.e., Donaldson and Barnes go up and down completely randomly.
Pair Corralation between Donaldson and Barnes
Considering the 90-day investment horizon Donaldson is expected to generate 2.93 times less return on investment than Barnes. But when comparing it to its historical volatility, Donaldson is 2.42 times less risky than Barnes. It trades about 0.14 of its potential returns per unit of risk. Barnes Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. 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 |
Donaldson vs. Barnes Group
Performance |
| Timeline |
| Donaldson |
| Barnes Group |
Donaldson and Barnes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Donaldson and Barnes
The main advantage of trading using opposite Donaldson and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donaldson position performs unexpectedly, Barnes 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 Barnes will offset losses from the drop in Barnes' long position.| Donaldson vs. IDEX Corporation | Donaldson vs. Watts Water Technologies | Donaldson vs. Gorman Rupp | Donaldson vs. Enerpac Tool Group |
| Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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