Correlation Between Salesforce and Barnes

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

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

Diversification Opportunities for Salesforce and Barnes

0.6

Correlation Coefficient

Salesforce  Barnes

Poor diversification

The 3 months correlation between Salesforce and Barnes is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and Barnes go up and down completely randomly.

Pair Corralation between Salesforce and Barnes

Considering the 90-day investment horizon Salesforce is expected to under-perform the Barnes. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.28 times less risky than Barnes. The stock trades about -0.23 of its potential returns per unit of risk. The Barnes Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. 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

Salesforce  vs.  Barnes Group

Salesforce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Barnes Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salesforce and Barnes

The main advantage of trading using opposite Salesforce and Barnes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce 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 Salesforce 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.