Correlation Between Barloworld and American Century

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

Diversification Opportunities for Barloworld and American Century

-0.21

Correlation Coefficient

Barloworld  American Century

Very good diversification

The 3 months correlation between Barloworld and American is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and American Century Etf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Etf 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Etf has no effect on the direction of Barloworld i.e., Barloworld and American Century go up and down completely randomly.

Pair Corralation between Barloworld and American Century

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 4.52 times more return on investment than American Century. However, Barloworld is 4.52 times more volatile than American Century Etf. It trades about 0.03 of its potential returns per unit of risk. American Century Etf is currently generating about 0.04 per unit of risk. If you would invest  480.00  in Barloworld Ltd ADR on October 4, 2024 and sell it today you would earn a total of  8.00  from holding Barloworld Ltd ADR or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.52%
Values	Daily Returns

Barloworld Ltd ADR  vs.  American Century Etf

Barloworld ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 6 (%) 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.

American Century Etf

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Barloworld and American Century

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

The idea behind Barloworld Ltd ADR and American Century Etf 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.