Correlation Between Barloworld and Welsbach Technology

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

Diversification Opportunities for Barloworld and Welsbach Technology

0.23

Correlation Coefficient

Barloworld  Welsbach Technology

Modest diversification

The 3 months correlation between Barloworld and Welsbach is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Welsbach Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welsbach Technology 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 Welsbach Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welsbach Technology has no effect on the direction of Barloworld i.e., Barloworld and Welsbach Technology go up and down completely randomly.

Pair Corralation between Barloworld and Welsbach Technology

Assuming the 90 days horizon Barloworld is expected to generate 1.72 times less return on investment than Welsbach Technology. In addition to that, Barloworld is 19.42 times more volatile than Welsbach Technology Metals. It trades about 0.0 of its total potential returns per unit of risk. Welsbach Technology Metals is currently generating about 0.14 per unit of volatility. If you would invest  1,105  in Welsbach Technology Metals on August 31, 2024 and sell it today you would earn a total of  21.00  from holding Welsbach Technology Metals or generate 1.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Welsbach Technology Metals

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.

Welsbach Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Welsbach Technology Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Welsbach Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and Welsbach Technology

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

The idea behind Barloworld Ltd ADR and Welsbach Technology Metals 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.