Correlation Between Barnes and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both Barnes and GE Aerospace 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 GE Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and GE Aerospace, you can compare the effects of market volatilities on Barnes and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and GE Aerospace.
Diversification Opportunities for Barnes and GE Aerospace
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Barnes and GE Aerospace is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Barnes i.e., Barnes and GE Aerospace go up and down completely randomly.
Pair Corralation between Barnes and GE Aerospace
Taking into account the 90-day investment horizon Barnes Group is expected to under-perform the GE Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, Barnes Group is 1.16 times less risky than GE Aerospace. The stock trades about -0.08 of its potential returns per unit of risk. The GE Aerospace is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 13,970 in GE Aerospace on January 29, 2024 and sell it today you would earn a total of 2,265 from holding GE Aerospace or generate 16.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Barnes Group vs. GE Aerospace
Performance |
Timeline |
Barnes Group |
GE Aerospace |
Barnes and GE Aerospace Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Barnes and GE Aerospace
The main advantage of trading using opposite Barnes and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.Barnes vs. Helios Technologies | Barnes vs. Enpro Industries | Barnes vs. Omega Flex | Barnes vs. Luxfer Holdings PLC |
GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |