Correlation Between SPDR Portfolio and Barloworld

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

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

Diversification Opportunities for SPDR Portfolio and Barloworld

-0.54

Correlation Coefficient

SPDR Portfolio  Barloworld

Excellent diversification

The 3 months correlation between SPDR and Barloworld is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Aggregate 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 Portfolio 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 Portfolio Aggregate 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 Portfolio i.e., SPDR Portfolio and Barloworld go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Barloworld

Given the investment horizon of 90 days SPDR Portfolio Aggregate is expected to generate 0.08 times more return on investment than Barloworld. However, SPDR Portfolio Aggregate is 13.01 times less risky than Barloworld. It trades about 0.13 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  2,487  in SPDR Portfolio Aggregate on December 29, 2024 and sell it today you would earn a total of  62.00  from holding SPDR Portfolio Aggregate or generate 2.49% return on investment over 90 days.

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

SPDR Portfolio Aggregate  vs.  Barloworld Ltd ADR

SPDR Portfolio Aggregate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Aggregate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest 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 Portfolio and Barloworld

The main advantage of trading using opposite SPDR Portfolio and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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 Portfolio Aggregate 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.