Correlation Between Barloworld and IShares Aaa

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

By analyzing existing cross correlation between Barloworld Ltd ADR and iShares Aaa , you can compare the effects of market volatilities on Barloworld and IShares Aaa 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 Barloworld with a short position of IShares Aaa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and IShares Aaa.

Diversification Opportunities for Barloworld and IShares Aaa

0.19

Correlation Coefficient

Barloworld  IShares Aaa

Average diversification

The 3 months correlation between Barloworld and IShares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and iShares Aaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aaa and Barloworld 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 Barloworld Ltd ADR are associated (or correlated) with IShares Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aaa has no effect on the direction of Barloworld i.e., Barloworld and IShares Aaa go up and down completely randomly.

Pair Corralation between Barloworld and IShares Aaa

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 14.47 times more return on investment than IShares Aaa. However, Barloworld is 14.47 times more volatile than iShares Aaa . It trades about 0.22 of its potential returns per unit of risk. iShares Aaa is currently generating about -0.29 per unit of risk. If you would invest  354.00  in Barloworld Ltd ADR on January 28, 2024 and sell it today you would earn a total of  96.00  from holding Barloworld Ltd ADR or generate 27.12% return on investment over 90 days.

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

Barloworld Ltd ADR  vs.  iShares Aaa

Barloworld ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Aaa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Aaa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Aaa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and IShares Aaa

The main advantage of trading using opposite Barloworld and IShares Aaa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, IShares Aaa 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 IShares Aaa will offset losses from the drop in IShares Aaa's long position.

The idea behind Barloworld Ltd ADR and iShares Aaa 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.