Correlation Between Barloworld and Amg Gwk

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

Diversification Opportunities for Barloworld and Amg Gwk

0.5

Correlation Coefficient

Barloworld  Amg Gwk

Very weak diversification

The 3 months correlation between Barloworld and Amg is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Amg Gwk Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Gwk Small 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 Amg Gwk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Gwk Small has no effect on the direction of Barloworld i.e., Barloworld and Amg Gwk go up and down completely randomly.

Pair Corralation between Barloworld and Amg Gwk

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Amg Gwk. In addition to that, Barloworld is 3.87 times more volatile than Amg Gwk Small. It trades about -0.03 of its total potential returns per unit of risk. Amg Gwk Small is currently generating about -0.09 per unit of volatility. If you would invest  3,233  in Amg Gwk Small on December 21, 2024 and sell it today you would lose (199.00) from holding Amg Gwk Small or give up 6.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.33%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Amg Gwk Small

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 latest weak performance, the 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.

Amg Gwk Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amg Gwk Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Amg Gwk

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

The idea behind Barloworld Ltd ADR and Amg Gwk Small 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.