Correlation Between Barloworld and Astoncrosswind Small

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

Diversification Opportunities for Barloworld and Astoncrosswind Small

0.22

Correlation Coefficient

Barloworld  Astoncrosswind Small

Modest diversification

The 3 months correlation between Barloworld and Astoncrosswind is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Astoncrosswind Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astoncrosswind Small Cap 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 Astoncrosswind Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astoncrosswind Small Cap has no effect on the direction of Barloworld i.e., Barloworld and Astoncrosswind Small go up and down completely randomly.

Pair Corralation between Barloworld and Astoncrosswind Small

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Astoncrosswind Small. In addition to that, Barloworld is 3.6 times more volatile than Astoncrosswind Small Cap. It trades about -0.02 of its total potential returns per unit of risk. Astoncrosswind Small Cap is currently generating about 0.14 per unit of volatility. If you would invest  1,679  in Astoncrosswind Small Cap on September 12, 2024 and sell it today you would earn a total of  151.00  from holding Astoncrosswind Small Cap or generate 8.99% return on investment over 90 days.

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

Barloworld Ltd ADR  vs.  Astoncrosswind Small Cap

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.

Astoncrosswind Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astoncrosswind Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Astoncrosswind Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barloworld and Astoncrosswind Small

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

The idea behind Barloworld Ltd ADR and Astoncrosswind Small Cap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.