Correlation Between Swan Defined and Barloworld

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

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

Diversification Opportunities for Swan Defined and Barloworld

-0.55

Correlation Coefficient

Swan Defined  Barloworld

Excellent diversification

The 3 months correlation between Swan and Barloworld is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Swan Defined 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 Swan Defined Risk 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 Swan Defined i.e., Swan Defined and Barloworld go up and down completely randomly.

Pair Corralation between Swan Defined and Barloworld

Assuming the 90 days horizon Swan Defined Risk is expected to under-perform the Barloworld. But the mutual fund apears to be less risky and, when comparing its historical volatility, Swan Defined Risk is 11.2 times less risky than Barloworld. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Barloworld Ltd ADR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  403.00  in Barloworld Ltd ADR on October 5, 2024 and sell it today you would earn a total of  258.00  from holding Barloworld Ltd ADR or generate 64.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Swan Defined Risk  vs.  Barloworld Ltd ADR

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund 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 Swan Defined and Barloworld

The main advantage of trading using opposite Swan Defined and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swan Defined 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 Swan Defined Risk 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.