Correlation Between Barloworld and Princeton Adaptive

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

Diversification Opportunities for Barloworld and Princeton Adaptive

-0.75

Correlation Coefficient

Barloworld  Princeton Adaptive

Pay attention - limited upside

The 3 months correlation between Barloworld and Princeton is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Princeton Adaptive Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Adaptive 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 Princeton Adaptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Adaptive has no effect on the direction of Barloworld i.e., Barloworld and Princeton Adaptive go up and down completely randomly.

Pair Corralation between Barloworld and Princeton Adaptive

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 27.98 times more return on investment than Princeton Adaptive. However, Barloworld is 27.98 times more volatile than Princeton Adaptive Premium. It trades about 0.05 of its potential returns per unit of risk. Princeton Adaptive Premium is currently generating about 0.06 per unit of risk. If you would invest  479.00  in Barloworld Ltd ADR on October 5, 2024 and sell it today you would earn a total of  182.00  from holding Barloworld Ltd ADR or generate 38.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	68.79%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Princeton Adaptive Premium

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.

Princeton Adaptive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Princeton Adaptive Premium has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Princeton Adaptive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and Princeton Adaptive

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

The idea behind Barloworld Ltd ADR and Princeton Adaptive Premium 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.