Correlation Between Barloworld and Orsted A/S

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

Diversification Opportunities for Barloworld and Orsted A/S

-0.66

Correlation Coefficient

Barloworld  Orsted A/S

Excellent diversification

The 3 months correlation between Barloworld and Orsted is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Orsted AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS ADR 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 Orsted A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS ADR has no effect on the direction of Barloworld i.e., Barloworld and Orsted A/S go up and down completely randomly.

Pair Corralation between Barloworld and Orsted A/S

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 1.65 times more return on investment than Orsted A/S. However, Barloworld is 1.65 times more volatile than Orsted AS ADR. It trades about -0.04 of its potential returns per unit of risk. Orsted AS ADR is currently generating about -0.11 per unit of risk. If you would invest  604.00  in Barloworld Ltd ADR on December 1, 2024 and sell it today you would lose (79.00) from holding Barloworld Ltd ADR or give up 13.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.33%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Orsted AS ADR

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Orsted AS ADR

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Barloworld and Orsted A/S

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

The idea behind Barloworld Ltd ADR and Orsted AS ADR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.