Correlation Between Mirvac and Barloworld

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

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

Diversification Opportunities for Mirvac and Barloworld

-0.35

Correlation Coefficient

Mirvac  Barloworld

Very good diversification

The 3 months correlation between Mirvac and Barloworld is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mirvac Group and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Mirvac 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 Mirvac Group 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 Mirvac i.e., Mirvac and Barloworld go up and down completely randomly.

Pair Corralation between Mirvac and Barloworld

Assuming the 90 days horizon Mirvac Group is expected to generate 1.07 times more return on investment than Barloworld. However, Mirvac is 1.07 times more volatile than Barloworld Ltd ADR. It trades about 0.1 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.0 per unit of risk. If you would invest  113.00  in Mirvac Group on September 1, 2024 and sell it today you would earn a total of  32.00  from holding Mirvac Group or generate 28.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Mirvac Group  vs.  Barloworld Ltd ADR

Mirvac Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mirvac Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Mirvac reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Mirvac and Barloworld

The main advantage of trading using opposite Mirvac and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mirvac 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 Mirvac Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.