Can any of the company-specific risk be diversified away by investing in both Barnes and Voxeljet 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 Voxeljet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barnes Group and Voxeljet Ag, you can compare the effects of market volatilities on Barnes and Voxeljet 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 Voxeljet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Voxeljet.
Diversification Opportunities for Barnes and Voxeljet
The 3 months correlation between Barnes and Voxeljet is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Voxeljet Ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voxeljet Ag 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 Voxeljet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voxeljet Ag has no effect on the direction of Barnes i.e., Barnes and Voxeljet go up and down completely randomly.
Taking into account the 90-day investment horizon Barnes Group is expected to under-perform the Voxeljet. But the stock apears to be less risky and, when comparing its historical volatility, Barnes Group is 1.83 times less risky than Voxeljet. The stock trades about -0.05 of its potential returns per unit of risk. The Voxeljet Ag is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 269.00 in Voxeljet Ag on August 30, 2023 and sell it today you would lose (120.00) from holding Voxeljet Ag or give up 44.61% of portfolio value over 90 days.
Over the last 90 days Barnes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2023. The current disturbance may also be a sign of long term up-swing for the company investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Voxeljet Ag are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Voxeljet unveiled solid returns over the last few months and may actually be approaching a breakup point.
The main advantage of trading using opposite Barnes and Voxeljet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Voxeljet 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 Voxeljet will offset losses from the drop in Voxeljet's long position.
The idea behind Barnes Group and Voxeljet Ag 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.
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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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