Correlation Between Barloworld and Cartesian Growth

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

Diversification Opportunities for Barloworld and Cartesian Growth

0.34

Correlation Coefficient

Barloworld  Cartesian Growth

Weak diversification

The 3 months correlation between Barloworld and Cartesian is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Cartesian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cartesian Growth 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 Cartesian Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cartesian Growth has no effect on the direction of Barloworld i.e., Barloworld and Cartesian Growth go up and down completely randomly.

Pair Corralation between Barloworld and Cartesian Growth

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 24.75 times more return on investment than Cartesian Growth. However, Barloworld is 24.75 times more volatile than Cartesian Growth. It trades about 0.13 of its potential returns per unit of risk. Cartesian Growth is currently generating about 0.13 per unit of risk. If you would invest  403.00  in Barloworld Ltd ADR on September 13, 2024 and sell it today you would earn a total of  222.00  from holding Barloworld Ltd ADR or generate 55.09% return on investment over 90 days.

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

Barloworld Ltd ADR  vs.  Cartesian Growth

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.

Cartesian Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cartesian Growth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Cartesian Growth is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Barloworld and Cartesian Growth

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

The idea behind Barloworld Ltd ADR and Cartesian Growth 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.

Check out your portfolio center.

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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.