Correlation Between SPDR SP and Barloworld

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

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

Diversification Opportunities for SPDR SP and Barloworld

-0.46

Correlation Coefficient

SPDR SP  Barloworld

Very good diversification

The 3 months correlation between SPDR and Barloworld is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Dividend and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and SPDR 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 SPDR SP Dividend 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 SPDR SP i.e., SPDR SP and Barloworld go up and down completely randomly.

Pair Corralation between SPDR SP and Barloworld

Considering the 90-day investment horizon SPDR SP Dividend is expected to generate 0.21 times more return on investment than Barloworld. However, SPDR SP Dividend is 4.74 times less risky than Barloworld. It trades about 0.06 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about -0.02 per unit of risk. If you would invest  13,086  in SPDR SP Dividend on December 29, 2024 and sell it today you would earn a total of  343.00  from holding SPDR SP Dividend or generate 2.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

SPDR SP Dividend  vs.  Barloworld Ltd ADR

SPDR SP Dividend

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Dividend are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, 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 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 SPDR SP and Barloworld

The main advantage of trading using opposite SPDR SP and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR 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 SPDR SP Dividend 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.