Correlation Between Stereo Vision and Barloworld

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

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

Diversification Opportunities for Stereo Vision and Barloworld

0.04

Correlation Coefficient

Stereo Vision  Barloworld

Significant diversification

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

Pair Corralation between Stereo Vision and Barloworld

Given the investment horizon of 90 days Stereo Vision Entertainment is expected to under-perform the Barloworld. But the pink sheet apears to be less risky and, when comparing its historical volatility, Stereo Vision Entertainment is 1.12 times less risky than Barloworld. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Barloworld Ltd ADR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  403.00  in Barloworld Ltd ADR on September 13, 2024 and sell it today you would earn a total of  222.00  from holding Barloworld Ltd ADR or generate 55.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Stereo Vision Entertainment  vs.  Barloworld Ltd ADR

Stereo Vision Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stereo Vision Entertainment 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 Stereo Vision and Barloworld

The main advantage of trading using opposite Stereo Vision and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stereo Vision 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 Stereo Vision Entertainment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.