Correlation Between Barloworld and Valiant Eagle

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

Diversification Opportunities for Barloworld and Valiant Eagle

0.24

Correlation Coefficient

Barloworld  Valiant Eagle

Modest diversification

The 3 months correlation between Barloworld and Valiant is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Valiant Eagle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valiant Eagle 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 Valiant Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valiant Eagle has no effect on the direction of Barloworld i.e., Barloworld and Valiant Eagle go up and down completely randomly.

Pair Corralation between Barloworld and Valiant Eagle

If you would invest  525.00  in Barloworld Ltd ADR on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Barloworld Ltd ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Valiant Eagle

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 fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Valiant Eagle

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valiant Eagle are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Valiant Eagle unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barloworld and Valiant Eagle

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

The idea behind Barloworld Ltd ADR and Valiant Eagle 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.