Correlation Between DHI and Barrett Business

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Can any of the company-specific risk be diversified away by investing in both DHI and Barrett Business 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 DHI and Barrett Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DHI Group and Barrett Business Services, you can compare the effects of market volatilities on DHI and Barrett Business 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 DHI with a short position of Barrett Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of DHI and Barrett Business.

Diversification Opportunities for DHI and Barrett Business

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between DHI and Barrett is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding DHI Group and Barrett Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrett Business Services and DHI 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 DHI Group are associated (or correlated) with Barrett Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrett Business Services has no effect on the direction of DHI i.e., DHI and Barrett Business go up and down completely randomly.

Pair Corralation between DHI and Barrett Business

Considering the 90-day investment horizon DHI Group is expected to under-perform the Barrett Business. In addition to that, DHI is 2.4 times more volatile than Barrett Business Services. It trades about -0.09 of its total potential returns per unit of risk. Barrett Business Services is currently generating about 0.24 per unit of volatility. If you would invest  11,571  in Barrett Business Services on December 29, 2023 and sell it today you would earn a total of  1,058  from holding Barrett Business Services or generate 9.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

DHI Group  vs.  Barrett Business Services

 Performance 
       Timeline  
DHI Group 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical indicators, DHI may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Barrett Business Services 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Barrett Business Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Barrett Business may actually be approaching a critical reversion point that can send shares even higher in April 2024.

DHI and Barrett Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DHI and Barrett Business

The main advantage of trading using opposite DHI and Barrett Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DHI position performs unexpectedly, Barrett Business 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 Barrett Business will offset losses from the drop in Barrett Business' long position.
The idea behind DHI Group and Barrett Business Services 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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