Correlation Between Barloworld and Sharps Technology

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

Diversification Opportunities for Barloworld and Sharps Technology

0.34

Correlation Coefficient

Barloworld  Sharps Technology

Weak diversification

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

Pair Corralation between Barloworld and Sharps Technology

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 0.26 times more return on investment than Sharps Technology. However, Barloworld Ltd ADR is 3.84 times less risky than Sharps Technology. It trades about -0.03 of its potential returns per unit of risk. Sharps Technology is currently generating about -0.13 per unit of risk. If you would invest  586.00  in Barloworld Ltd ADR on December 23, 2024 and sell it today you would lose (61.00) from holding Barloworld Ltd ADR or give up 10.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.16%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Sharps Technology

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sharps Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sharps Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Barloworld and Sharps Technology

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

The idea behind Barloworld Ltd ADR and Sharps Technology 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.