Correlation Between Barloworld and Mainstay Moderate

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

Diversification Opportunities for Barloworld and Mainstay Moderate

-0.25

Correlation Coefficient

Barloworld  Mainstay Moderate

Very good diversification

The 3 months correlation between Barloworld and Mainstay is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Mainstay Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Moderate 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 Mainstay Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Moderate has no effect on the direction of Barloworld i.e., Barloworld and Mainstay Moderate go up and down completely randomly.

Pair Corralation between Barloworld and Mainstay Moderate

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 11.16 times more return on investment than Mainstay Moderate. However, Barloworld is 11.16 times more volatile than Mainstay Moderate Allocation. It trades about 0.04 of its potential returns per unit of risk. Mainstay Moderate Allocation is currently generating about 0.04 per unit of risk. If you would invest  510.00  in Barloworld Ltd ADR on October 5, 2024 and sell it today you would earn a total of  151.00  from holding Barloworld Ltd ADR or generate 29.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.32%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Mainstay Moderate Allocation

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.

Mainstay Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mainstay Moderate Allocation 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 Mainstay Moderate

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

The idea behind Barloworld Ltd ADR and Mainstay Moderate Allocation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.