Correlation Between Generac Holdings and Barnes

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

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

Diversification Opportunities for Generac Holdings and Barnes

-0.1

Correlation Coefficient

Generac Holdings  Barnes

Good diversification

The 3 months correlation between Generac and Barnes is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Generac Holdings 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 Generac Holdings 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 Generac Holdings i.e., Generac Holdings and Barnes go up and down completely randomly.

Pair Corralation between Generac Holdings and Barnes

Given the investment horizon of 90 days Generac Holdings is expected to under-perform the Barnes. But the stock apears to be less risky and, when comparing its historical volatility, Generac Holdings is 1.19 times less risky than Barnes. The stock trades about 0.0 of its potential returns per unit of risk. The Barnes Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,583  in Barnes Group on February 5, 2024 and sell it today you would earn a total of  71.00  from holding Barnes Group or generate 1.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Generac Holdings  vs.  Barnes Group

Generac Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generac Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Generac Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Barnes Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 6 (%) 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.

Pair Trading with Generac Holdings and Barnes

The main advantage of trading using opposite Generac Holdings and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generac Holdings 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 Generac Holdings 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.