Correlation Between Dover and Barnes
Can any of the company-specific risk be diversified away by investing in both Dover 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 Dover and Barnes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dover and Barnes Group, you can compare the effects of market volatilities on Dover 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 Dover with a short position of Barnes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dover and Barnes.
Diversification Opportunities for Dover and Barnes
Poor diversification
The 3 months correlation between Dover and Barnes is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dover and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Dover 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 Dover 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 Dover i.e., Dover and Barnes go up and down completely randomly.
Pair Corralation between Dover and Barnes
Considering the 90-day investment horizon Dover is expected to generate 14.64 times more return on investment than Barnes. However, Dover is 14.64 times more volatile than Barnes Group. It trades about 0.23 of its potential returns per unit of risk. Barnes Group is currently generating about 0.07 per unit of risk. If you would invest 19,184 in Dover on August 30, 2024 and sell it today you would earn a total of 1,467 from holding Dover or generate 7.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dover vs. Barnes Group
Performance |
| Timeline |
| Dover |
| Barnes Group |
Dover and Barnes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dover and Barnes
The main advantage of trading using opposite Dover and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dover 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.The idea behind Dover and Barnes Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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