Correlation Between Global X and Barloworld

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

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

Diversification Opportunities for Global X and Barloworld

0.04

Correlation Coefficient

Global X  Barloworld

Significant diversification

The 3 months correlation between Global and Barloworld is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Global X 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 Global X MSCI 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 Global X i.e., Global X and Barloworld go up and down completely randomly.

Pair Corralation between Global X and Barloworld

Given the investment horizon of 90 days Global X MSCI is expected to generate 0.18 times more return on investment than Barloworld. However, Global X MSCI is 5.49 times less risky than Barloworld. It trades about 0.09 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about -0.04 per unit of risk. If you would invest  2,394  in Global X MSCI on December 3, 2024 and sell it today you would earn a total of  106.00  from holding Global X MSCI or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Global X MSCI  vs.  Barloworld Ltd ADR

Global X MSCI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Global X and Barloworld

The main advantage of trading using opposite Global X and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X MSCI 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.