Correlation Between Barloworld and Fidelity Covington

Can any of the company-specific risk be diversified away by investing in both Barloworld and Fidelity Covington 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 Fidelity Covington 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 Fidelity Covington Trust, you can compare the effects of market volatilities on Barloworld and Fidelity Covington 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 Fidelity Covington. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Fidelity Covington.

Diversification Opportunities for Barloworld and Fidelity Covington

-0.42

Correlation Coefficient

Barloworld  Fidelity Covington

Very good diversification

The 3 months correlation between Barloworld and Fidelity is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Barloworld i.e., Barloworld and Fidelity Covington go up and down completely randomly.

Pair Corralation between Barloworld and Fidelity Covington

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Fidelity Covington. In addition to that, Barloworld is 1.85 times more volatile than Fidelity Covington Trust. It trades about -0.01 of its total potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.04 per unit of volatility. If you would invest  1,456  in Fidelity Covington Trust on July 5, 2024 and sell it today you would earn a total of  99.00  from holding Fidelity Covington Trust or generate 6.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.2%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Fidelity Covington Trust

Barloworld ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barloworld Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Covington Trust

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Barloworld and Fidelity Covington

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

The idea behind Barloworld Ltd ADR and Fidelity Covington Trust 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..