Correlation Between EVI Industries and Barrett Business

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

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

Diversification Opportunities for EVI Industries and Barrett Business

0.38

Correlation Coefficient

EVI Industries  Barrett Business

Weak diversification

The 3 months correlation between EVI and Barrett is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding EVI Industries 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 EVI Industries 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 EVI Industries 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 EVI Industries i.e., EVI Industries and Barrett Business go up and down completely randomly.

Pair Corralation between EVI Industries and Barrett Business

Considering the 90-day investment horizon EVI Industries is expected to under-perform the Barrett Business. In addition to that, EVI Industries is 3.16 times more volatile than Barrett Business Services. It trades about -0.06 of its total potential returns per unit of risk. Barrett Business Services is currently generating about 0.15 per unit of volatility. If you would invest  12,058  in Barrett Business Services on February 14, 2024 and sell it today you would earn a total of  428.00  from holding Barrett Business Services or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EVI Industries  vs.  Barrett Business Services

EVI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, EVI Industries is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Barrett Business Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barrett Business Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Barrett Business demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EVI Industries and Barrett Business

The main advantage of trading using opposite EVI Industries and Barrett Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EVI Industries 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 EVI Industries 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.