Correlation Between Barloworld and Kinetics Internet

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

Diversification Opportunities for Barloworld and Kinetics Internet

0.16

Correlation Coefficient

Barloworld  Kinetics Internet

Average diversification

The 3 months correlation between Barloworld and Kinetics is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Kinetics Internet Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Internet 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 Kinetics Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Internet has no effect on the direction of Barloworld i.e., Barloworld and Kinetics Internet go up and down completely randomly.

Pair Corralation between Barloworld and Kinetics Internet

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Kinetics Internet. In addition to that, Barloworld is 1.86 times more volatile than Kinetics Internet Fund. It trades about -0.02 of its total potential returns per unit of risk. Kinetics Internet Fund is currently generating about 0.29 per unit of volatility. If you would invest  7,674  in Kinetics Internet Fund on September 12, 2024 and sell it today you would earn a total of  3,306  from holding Kinetics Internet Fund or generate 43.08% return on investment over 90 days.

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

Barloworld Ltd ADR  vs.  Kinetics Internet Fund

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.

Kinetics Internet

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Internet Fund are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Kinetics Internet showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barloworld and Kinetics Internet

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

The idea behind Barloworld Ltd ADR and Kinetics Internet Fund 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.