Correlation Between Capstone Green and Barnes

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

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

Diversification Opportunities for Capstone Green and Barnes

Very poor diversification

The 3 months correlation between Capstone and Barnes is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Green Energy and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Capstone Green 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 Capstone Green Energy 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 Capstone Green i.e., Capstone Green and Barnes go up and down completely randomly.

Pair Corralation between Capstone Green and Barnes

Given the investment horizon of 90 days Capstone Green Energy is expected to under-perform the Barnes. In addition to that, Capstone Green is 12.81 times more volatile than Barnes Group. It trades about -0.15 of its total potential returns per unit of risk. Barnes Group is currently generating about -0.5 per unit of volatility. If you would invest  3,764  in Barnes Group on July 6, 2023 and sell it today you would lose (465.00) from holding Barnes Group or give up 12.35% of portfolio value over 90 days.

Capstone Green Energy  vs.  Barnes Group

Capstone Green Energy

Capstone Performance

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Over the last 90 days Capstone Green Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in November 2023. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Barnes Group

Barnes Performance

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Over the last 90 days Barnes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in November 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Capstone Green and Barnes

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

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.