Correlation Between Barloworld and Columbia

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

Diversification Opportunities for Barloworld and Columbia

-0.31

Correlation Coefficient

Barloworld  Columbia

Very good diversification

The 3 months correlation between Barloworld and Columbia is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Columbia EM Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia EM Core 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 Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia EM Core has no effect on the direction of Barloworld i.e., Barloworld and Columbia go up and down completely randomly.

Pair Corralation between Barloworld and Columbia

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 5.02 times more return on investment than Columbia. However, Barloworld is 5.02 times more volatile than Columbia EM Core. It trades about 0.0 of its potential returns per unit of risk. Columbia EM Core is currently generating about -0.04 per unit of risk. If you would invest  443.00  in Barloworld Ltd ADR on September 5, 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	100.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Columbia EM Core

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.

Columbia EM Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia EM Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Columbia is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and Columbia

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

The idea behind Barloworld Ltd ADR and Columbia EM Core 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.