Correlation Between Barnes and Enpro Industries

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

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

Diversification Opportunities for Barnes and Enpro Industries

0.27

Correlation Coefficient

Barnes  Enpro Industries

Modest diversification

The 3 months correlation between Barnes and Enpro is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Enpro Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enpro Industries 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 Enpro Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enpro Industries has no effect on the direction of Barnes i.e., Barnes and Enpro Industries go up and down completely randomly.

Pair Corralation between Barnes and Enpro Industries

Taking into account the 90-day investment horizon Barnes Group is expected to generate 2.0 times more return on investment than Enpro Industries. However, Barnes is 2.0 times more volatile than Enpro Industries. It trades about -0.06 of its potential returns per unit of risk. Enpro Industries is currently generating about -0.32 per unit of risk. If you would invest  3,629  in Barnes Group on January 31, 2024 and sell it today you would lose (157.00) from holding Barnes Group or give up 4.33% of portfolio value over 90 days.

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

Barnes Group  vs.  Enpro Industries

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 weak fundamental drivers, Barnes may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Enpro Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enpro Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Enpro Industries is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Barnes and Enpro Industries

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

The idea behind Barnes Group and Enpro Industries 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.