Correlation Between Barloworld and Pacer BlueStar

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

Diversification Opportunities for Barloworld and Pacer BlueStar

0.19

Correlation Coefficient

Barloworld  Pacer BlueStar

Average diversification

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

Pair Corralation between Barloworld and Pacer BlueStar

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Pacer BlueStar. In addition to that, Barloworld is 2.76 times more volatile than Pacer BlueStar Engineering. It trades about -0.03 of its total potential returns per unit of risk. Pacer BlueStar Engineering is currently generating about 0.0 per unit of volatility. If you would invest  2,173  in Pacer BlueStar Engineering on December 21, 2024 and sell it today you would lose (13.00) from holding Pacer BlueStar Engineering or give up 0.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.33%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Pacer BlueStar Engineering

Barloworld ADR

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pacer BlueStar Engin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacer BlueStar Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Pacer BlueStar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Barloworld and Pacer BlueStar

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

The idea behind Barloworld Ltd ADR and Pacer BlueStar Engineering 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.