Correlation Between Barloworld and Frontera

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

Diversification Opportunities for Barloworld and Frontera

0.0

Correlation Coefficient

Barloworld  Frontera

Pay attention - limited upside

The 3 months correlation between Barloworld and Frontera is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Frontera Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontera Group 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 Frontera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontera Group has no effect on the direction of Barloworld i.e., Barloworld and Frontera go up and down completely randomly.

Pair Corralation between Barloworld and Frontera

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 0.44 times more return on investment than Frontera. However, Barloworld Ltd ADR is 2.25 times less risky than Frontera. It trades about 0.04 of its potential returns per unit of risk. Frontera Group is currently generating about 0.01 per unit of risk. If you would invest  505.00  in Barloworld Ltd ADR on October 21, 2024 and sell it today you would earn a total of  108.00  from holding Barloworld Ltd ADR or generate 21.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Frontera Group

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.

Frontera Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Frontera Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Frontera is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Barloworld and Frontera

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

The idea behind Barloworld Ltd ADR and Frontera Group 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.