Correlation Between Barloworld and WESTERN ACQUISITION

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

Diversification Opportunities for Barloworld and WESTERN ACQUISITION

-0.3

Correlation Coefficient

Barloworld  WESTERN ACQUISITION

Very good diversification

The 3 months correlation between Barloworld and WESTERN is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and WESTERN ACQUISITION VENTURES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN ACQUISITION 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 WESTERN ACQUISITION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN ACQUISITION has no effect on the direction of Barloworld i.e., Barloworld and WESTERN ACQUISITION go up and down completely randomly.

Pair Corralation between Barloworld and WESTERN ACQUISITION

If you would invest  443.00  in Barloworld Ltd ADR on September 2, 2024 and sell it today you would lose (20.00) from holding Barloworld Ltd ADR or give up 4.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Barloworld Ltd ADR  vs.  WESTERN ACQUISITION VENTURES

Barloworld ADR

Risk-Adjusted Performance

0 of 100

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.

WESTERN ACQUISITION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTERN ACQUISITION VENTURES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WESTERN ACQUISITION is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Barloworld and WESTERN ACQUISITION

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

The idea behind Barloworld Ltd ADR and WESTERN ACQUISITION VENTURES 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..