Correlation Between Barloworld and GAMCO Natural

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

Diversification Opportunities for Barloworld and GAMCO Natural

-0.69

Correlation Coefficient

Barloworld  GAMCO Natural

Excellent diversification

The 3 months correlation between Barloworld and GAMCO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources 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 GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of Barloworld i.e., Barloworld and GAMCO Natural go up and down completely randomly.

Pair Corralation between Barloworld and GAMCO Natural

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 17.35 times more return on investment than GAMCO Natural. However, Barloworld is 17.35 times more volatile than GAMCO Natural Resources. It trades about 0.23 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about -0.07 per unit of risk. If you would invest  423.00  in Barloworld Ltd ADR on October 6, 2024 and sell it today you would earn a total of  226.00  from holding Barloworld Ltd ADR or generate 53.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  GAMCO Natural Resources

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.

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Barloworld and GAMCO Natural

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

The idea behind Barloworld Ltd ADR and GAMCO Natural Resources 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 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.