Correlation Between ClearOne and Barloworld

Can any of the company-specific risk be diversified away by investing in both ClearOne and Barloworld 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 ClearOne and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ClearOne and Barloworld Ltd ADR, you can compare the effects of market volatilities on ClearOne and Barloworld 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 ClearOne with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearOne and Barloworld.

Diversification Opportunities for ClearOne and Barloworld

0.22

Correlation Coefficient

ClearOne  Barloworld

Modest diversification

The 3 months correlation between ClearOne and Barloworld is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ClearOne and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and ClearOne 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 ClearOne are associated (or correlated) with Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of ClearOne i.e., ClearOne and Barloworld go up and down completely randomly.

Pair Corralation between ClearOne and Barloworld

Given the investment horizon of 90 days ClearOne is expected to generate 1.44 times more return on investment than Barloworld. However, ClearOne is 1.44 times more volatile than Barloworld Ltd ADR. It trades about 0.06 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest  39.00  in ClearOne on October 5, 2024 and sell it today you would earn a total of  92.00  from holding ClearOne or generate 235.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.79%
Values	Daily Returns

ClearOne  vs.  Barloworld Ltd ADR

ClearOne

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ClearOne are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ClearOne displayed solid returns over the last few months and may actually be approaching a breakup point.

Barloworld ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ClearOne and Barloworld

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

The idea behind ClearOne and Barloworld Ltd ADR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.