Correlation Between Barloworld and Stereo Vision

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

Diversification Opportunities for Barloworld and Stereo Vision

-0.13

Correlation Coefficient

Barloworld  Stereo Vision

Good diversification

The 3 months correlation between Barloworld and Stereo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Stereo Vision Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stereo Vision Entert 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 Stereo Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stereo Vision Entert has no effect on the direction of Barloworld i.e., Barloworld and Stereo Vision go up and down completely randomly.

Pair Corralation between Barloworld and Stereo Vision

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 0.29 times more return on investment than Stereo Vision. However, Barloworld Ltd ADR is 3.43 times less risky than Stereo Vision. It trades about -0.02 of its potential returns per unit of risk. Stereo Vision Entertainment is currently generating about -0.05 per unit of risk. If you would invest  577.00  in Barloworld Ltd ADR on December 27, 2024 and sell it today you would lose (52.00) from holding Barloworld Ltd ADR or give up 9.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Stereo Vision Entertainment

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.

Stereo Vision Entert

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stereo Vision Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Barloworld and Stereo Vision

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

The idea behind Barloworld Ltd ADR and Stereo Vision Entertainment 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.