Correlation Between Barloworld and TOMI Environmental

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

Diversification Opportunities for Barloworld and TOMI Environmental

0.66

Correlation Coefficient

Barloworld  TOMI Environmental

Poor diversification

The 3 months correlation between Barloworld and TOMI is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and TOMI Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOMI Environmental 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 TOMI Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOMI Environmental has no effect on the direction of Barloworld i.e., Barloworld and TOMI Environmental go up and down completely randomly.

Pair Corralation between Barloworld and TOMI Environmental

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 0.83 times more return on investment than TOMI Environmental. However, Barloworld Ltd ADR is 1.2 times less risky than TOMI Environmental. It trades about -0.02 of its potential returns per unit of risk. TOMI Environmental Solutions is currently generating about -0.04 per unit of risk. If you would invest  577.00  in Barloworld Ltd ADR on December 29, 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 Together
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

Barloworld Ltd ADR  vs.  TOMI Environmental Solutions

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.

TOMI Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOMI Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Barloworld and TOMI Environmental

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

The idea behind Barloworld Ltd ADR and TOMI Environmental Solutions 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.