Correlation Between Barloworld and GCM Grosvenor

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

Diversification Opportunities for Barloworld and GCM Grosvenor

-0.29

Correlation Coefficient

Barloworld  GCM Grosvenor

Very good diversification

The 3 months correlation between Barloworld and GCM is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor 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 GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of Barloworld i.e., Barloworld and GCM Grosvenor go up and down completely randomly.

Pair Corralation between Barloworld and GCM Grosvenor

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the GCM Grosvenor. But the pink sheet apears to be less risky and, when comparing its historical volatility, Barloworld Ltd ADR is 2.3 times less risky than GCM Grosvenor. The pink sheet trades about -0.02 of its potential returns per unit of risk. The GCM Grosvenor is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  126.00  in GCM Grosvenor on December 30, 2024 and sell it today you would earn a total of  74.00  from holding GCM Grosvenor or generate 58.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Barloworld Ltd ADR  vs.  GCM Grosvenor

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 fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GCM Grosvenor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barloworld and GCM Grosvenor

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

The idea behind Barloworld Ltd ADR and GCM Grosvenor 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.