Correlation Between Barloworld and Gold Portfolio

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

Diversification Opportunities for Barloworld and Gold Portfolio

-0.56

Correlation Coefficient

Barloworld  Gold Portfolio

Excellent diversification

The 3 months correlation between Barloworld and Gold is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Gold Portfolio Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Gold 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 Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Gold has no effect on the direction of Barloworld i.e., Barloworld and Gold Portfolio go up and down completely randomly.

Pair Corralation between Barloworld and Gold Portfolio

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 3.06 times more return on investment than Gold Portfolio. However, Barloworld is 3.06 times more volatile than Gold Portfolio Gold. It trades about 0.07 of its potential returns per unit of risk. Gold Portfolio Gold is currently generating about 0.06 per unit of risk. If you would invest  404.00  in Barloworld Ltd ADR on October 7, 2024 and sell it today you would earn a total of  257.00  from holding Barloworld Ltd ADR or generate 63.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	74.19%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Gold Portfolio Gold

Barloworld ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 10 (%) 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.

Gold Portfolio Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Portfolio Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Barloworld and Gold Portfolio

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

The idea behind Barloworld Ltd ADR and Gold Portfolio Gold 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 CEOs Directory module to screen CEOs from public companies around the world.