Correlation Between Barloworld and Arcadis NV

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

Diversification Opportunities for Barloworld and Arcadis NV

-0.37

Correlation Coefficient

Barloworld  Arcadis NV

Very good diversification

The 3 months correlation between Barloworld and Arcadis is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis NV 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 Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of Barloworld i.e., Barloworld and Arcadis NV go up and down completely randomly.

Pair Corralation between Barloworld and Arcadis NV

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 3.21 times more return on investment than Arcadis NV. However, Barloworld is 3.21 times more volatile than Arcadis NV. It trades about 0.07 of its potential returns per unit of risk. Arcadis NV is currently generating about 0.1 per unit of risk. If you would invest  382.00  in Barloworld Ltd ADR on September 14, 2024 and sell it today you would earn a total of  196.00  from holding Barloworld Ltd ADR or generate 51.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.54%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Arcadis NV

Barloworld ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Arcadis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcadis NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Barloworld and Arcadis NV

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

The idea behind Barloworld Ltd ADR and Arcadis NV 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.