Correlation Between Laser Photonics and Barnes

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

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

Diversification Opportunities for Laser Photonics and Barnes

-0.38

Correlation Coefficient

Laser Photonics  Barnes

Very good diversification

The 3 months correlation between Laser and Barnes is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Laser Photonics and Barnes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barnes Group and Laser Photonics 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 Laser Photonics 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 Laser Photonics i.e., Laser Photonics and Barnes go up and down completely randomly.

Pair Corralation between Laser Photonics and Barnes

Given the investment horizon of 90 days Laser Photonics is expected to generate 9.22 times more return on investment than Barnes. However, Laser Photonics is 9.22 times more volatile than Barnes Group. It trades about 0.09 of its potential returns per unit of risk. Barnes Group is currently generating about 0.17 per unit of risk. If you would invest  504.00  in Laser Photonics on September 5, 2024 and sell it today you would earn a total of  46.00  from holding Laser Photonics or generate 9.13% return on investment over 90 days.

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

Laser Photonics  vs.  Barnes Group

Laser Photonics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laser Photonics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Laser Photonics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Barnes Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laser Photonics and Barnes

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