Correlation Between IShares Short and Barloworld

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

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

Diversification Opportunities for IShares Short and Barloworld

0.17

Correlation Coefficient

IShares Short  Barloworld

Average diversification

The 3 months correlation between IShares and Barloworld is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and IShares Short 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 iShares Short Maturity 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 IShares Short i.e., IShares Short and Barloworld go up and down completely randomly.

Pair Corralation between IShares Short and Barloworld

Given the investment horizon of 90 days IShares Short is expected to generate 52.4 times less return on investment than Barloworld. But when comparing it to its historical volatility, iShares Short Maturity is 107.91 times less risky than Barloworld. It trades about 0.45 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  423.00  in Barloworld Ltd ADR on September 15, 2024 and sell it today you would earn a total of  155.00  from holding Barloworld Ltd ADR or generate 36.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

iShares Short Maturity  vs.  Barloworld Ltd ADR

iShares Short Maturity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Barloworld ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 9 (%) 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 IShares Short and Barloworld

The main advantage of trading using opposite IShares Short and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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 iShares Short Maturity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.