Correlation Between Barloworld and Global Partners

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

Diversification Opportunities for Barloworld and Global Partners

0.42

Correlation Coefficient

Barloworld  Global Partners

Very weak diversification

The 3 months correlation between Barloworld and Global is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Barloworld i.e., Barloworld and Global Partners go up and down completely randomly.

Pair Corralation between Barloworld and Global Partners

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 16.8 times more return on investment than Global Partners. However, Barloworld is 16.8 times more volatile than Global Partners LP. It trades about 0.04 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.11 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	Moves Together
Strength	Weak
Accuracy	71.57%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Global Partners LP

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.

Global Partners LP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and Global Partners

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

The idea behind Barloworld Ltd ADR and Global Partners LP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.