Correlation Between Barloworld and SPDR SP

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

Diversification Opportunities for Barloworld and SPDR SP

-0.55

Correlation Coefficient

Barloworld  SPDR SP

Excellent diversification

The 3 months correlation between Barloworld and SPDR is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Dividend has no effect on the direction of Barloworld i.e., Barloworld and SPDR SP go up and down completely randomly.

Pair Corralation between Barloworld and SPDR SP

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the SPDR SP. In addition to that, Barloworld is 6.08 times more volatile than SPDR SP Dividend. It trades about -0.04 of its total potential returns per unit of risk. SPDR SP Dividend is currently generating about -0.06 per unit of volatility. If you would invest  14,223  in SPDR SP Dividend on December 2, 2024 and sell it today you would lose (394.00) from holding SPDR SP Dividend or give up 2.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.77%
Values	Daily Returns

Barloworld Ltd ADR  vs.  SPDR SP Dividend

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SPDR SP Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, SPDR SP 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 SPDR SP

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

The idea behind Barloworld Ltd ADR and SPDR SP Dividend 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.