Correlation Between AB Disruptors and Barloworld

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

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

Diversification Opportunities for AB Disruptors and Barloworld

0.37

Correlation Coefficient

AB Disruptors  Barloworld

Weak diversification

The 3 months correlation between FWD and Barloworld is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding AB Disruptors ETF and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and AB Disruptors 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 AB Disruptors ETF 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 AB Disruptors i.e., AB Disruptors and Barloworld go up and down completely randomly.

Pair Corralation between AB Disruptors and Barloworld

Considering the 90-day investment horizon AB Disruptors ETF is expected to generate 0.46 times more return on investment than Barloworld. However, AB Disruptors ETF is 2.17 times less risky than Barloworld. It trades about -0.05 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about -0.03 per unit of risk. If you would invest  8,086  in AB Disruptors ETF on December 20, 2024 and sell it today you would lose (565.00) from holding AB Disruptors ETF or give up 6.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.67%
Values	Daily Returns

AB Disruptors ETF  vs.  Barloworld Ltd ADR

AB Disruptors ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days AB Disruptors ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Barloworld ADR

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with AB Disruptors and Barloworld

The main advantage of trading using opposite AB Disruptors and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB Disruptors 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 AB Disruptors ETF 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.