Correlation Between Barnes and CRH PLC
Can any of the company-specific risk be diversified away by investing in both Barnes and CRH PLC 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 CRH PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and CRH PLC ADR, you can compare the effects of market volatilities on Barnes and CRH PLC 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 CRH PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and CRH PLC.
Diversification Opportunities for Barnes and CRH PLC
Poor diversification
The 3 months correlation between Barnes and CRH is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and CRH PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH PLC ADR 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 CRH PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRH PLC ADR has no effect on the direction of Barnes i.e., Barnes and CRH PLC go up and down completely randomly.
Pair Corralation between Barnes and CRH PLC
Taking into account the 90-day investment horizon Barnes Group is expected to generate 2.08 times more return on investment than CRH PLC. However, Barnes is 2.08 times more volatile than CRH PLC ADR. It trades about 0.01 of its potential returns per unit of risk. CRH PLC ADR is currently generating about -0.44 per unit of risk. If you would invest 3,627 in Barnes Group on January 26, 2024 and sell it today you would lose (1.00) from holding Barnes Group or give up 0.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barnes Group vs. CRH PLC ADR
Performance |
| Timeline |
| Barnes Group |
| CRH PLC ADR |
Barnes and CRH PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barnes and CRH PLC
The main advantage of trading using opposite Barnes and CRH PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, CRH PLC 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 CRH PLC will offset losses from the drop in CRH PLC's long position.The idea behind Barnes Group and CRH PLC ADR 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.| CRH PLC vs. United States Lime | CRH PLC vs. Holcim | CRH PLC vs. Lafargeholcim Ltd ADR | CRH PLC vs. Vulcan Materials |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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