Correlation Between Barloworld and Vanguard Global

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

Diversification Opportunities for Barloworld and Vanguard Global

-0.62

Correlation Coefficient

Barloworld  Vanguard Global

Excellent diversification

The 3 months correlation between Barloworld and Vanguard is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Vanguard Global Ex Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Ex 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 Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Ex has no effect on the direction of Barloworld i.e., Barloworld and Vanguard Global go up and down completely randomly.

Pair Corralation between Barloworld and Vanguard Global

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Vanguard Global. In addition to that, Barloworld is 6.19 times more volatile than Vanguard Global Ex Us. It trades about -0.02 of its total potential returns per unit of risk. Vanguard Global Ex Us is currently generating about 0.07 per unit of volatility. If you would invest  8,003  in Vanguard Global Ex Us on December 24, 2024 and sell it today you would earn a total of  209.00  from holding Vanguard Global Ex Us or generate 2.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Vanguard Global Ex Us

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.

Vanguard Global Ex

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Ex Us are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Global 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 Vanguard Global

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

The idea behind Barloworld Ltd ADR and Vanguard Global Ex Us 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.