Correlation Between Barloworld and Revival Gold

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

Diversification Opportunities for Barloworld and Revival Gold

-0.58

Correlation Coefficient

Barloworld  Revival Gold

Excellent diversification

The 3 months correlation between Barloworld and Revival is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Revival Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revival Gold 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 Revival Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revival Gold has no effect on the direction of Barloworld i.e., Barloworld and Revival Gold go up and down completely randomly.

Pair Corralation between Barloworld and Revival Gold

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Revival Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Barloworld Ltd ADR is 1.41 times less risky than Revival Gold. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Revival Gold is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Revival Gold on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Revival Gold or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Revival Gold

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.

Revival Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Revival Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Revival Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barloworld and Revival Gold

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

The idea behind Barloworld Ltd ADR and Revival Gold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.