Correlation Between Barnes and Cummins

Can any of the company-specific risk be diversified away by investing in both Barnes and Cummins 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 Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barnes Group and Cummins, you can compare the effects of market volatilities on Barnes and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Cummins.

Diversification Opportunities for Barnes and Cummins

0.38

Correlation Coefficient

Barnes  Cummins

Weak diversification

The 3 months correlation between Barnes and Cummins is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Barnes i.e., Barnes and Cummins go up and down completely randomly.

Pair Corralation between Barnes and Cummins

Taking into account the 90-day investment horizon Barnes Group is expected to generate 2.33 times more return on investment than Cummins. However, Barnes is 2.33 times more volatile than Cummins. It trades about 0.06 of its potential returns per unit of risk. Cummins is currently generating about -0.18 per unit of risk. If you would invest  3,512  in Barnes Group on February 3, 2024 and sell it today you would earn a total of  108.00  from holding Barnes Group or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barnes Group  vs.  Cummins

Barnes Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Barnes may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cummins

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, Cummins demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barnes and Cummins

The main advantage of trading using opposite Barnes and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.

The idea behind Barnes Group and Cummins 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.