Correlation Between Invesco SP and Barloworld

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

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

Diversification Opportunities for Invesco SP and Barloworld

0.1

Correlation Coefficient

Invesco SP  Barloworld

Average diversification

The 3 months correlation between Invesco and Barloworld is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP Ultra and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Invesco SP 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 Invesco SP Ultra 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 Invesco SP i.e., Invesco SP and Barloworld go up and down completely randomly.

Pair Corralation between Invesco SP and Barloworld

Given the investment horizon of 90 days Invesco SP is expected to generate 9.18 times less return on investment than Barloworld. But when comparing it to its historical volatility, Invesco SP Ultra is 6.25 times less risky than Barloworld. It trades about 0.04 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  349.00  in Barloworld Ltd ADR on September 19, 2024 and sell it today you would earn a total of  241.00  from holding Barloworld Ltd ADR or generate 69.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	71.37%
Values	Daily Returns

Invesco SP Ultra  vs.  Barloworld Ltd ADR

Invesco SP Ultra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP Ultra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Invesco SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Invesco SP and Barloworld

The main advantage of trading using opposite Invesco SP and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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 Invesco SP Ultra 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 Anywhere module to track or share privately all of your investments from the convenience of any device.