Correlation Between Barloworld and US Gold

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

Diversification Opportunities for Barloworld and US Gold

-0.18

Correlation Coefficient

Barloworld  US Gold

Good diversification

The 3 months correlation between Barloworld and USAU is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and US Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Gold Corp 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 US Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Gold Corp has no effect on the direction of Barloworld i.e., Barloworld and US Gold go up and down completely randomly.

Pair Corralation between Barloworld and US Gold

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 1.67 times more return on investment than US Gold. However, Barloworld is 1.67 times more volatile than US Gold Corp. It trades about 0.13 of its potential returns per unit of risk. US Gold Corp is currently generating about 0.04 per unit of risk. If you would invest  403.00  in Barloworld Ltd ADR on October 21, 2024 and sell it today you would earn a total of  210.00  from holding Barloworld Ltd ADR or generate 52.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  US Gold Corp

Barloworld ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

US Gold Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in US Gold Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, US Gold may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Barloworld and US Gold

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

The idea behind Barloworld Ltd ADR and US Gold Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.