Correlation Between Barloworld and APx Acquisition
Can any of the company-specific risk be diversified away by investing in both Barloworld and APx Acquisition 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 Barloworld and APx Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barloworld Ltd ADR and APx Acquisition I, you can compare the effects of market volatilities on Barloworld and APx Acquisition 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 Barloworld with a short position of APx Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and APx Acquisition.
Diversification Opportunities for Barloworld and APx Acquisition
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Barloworld and APx is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and APx Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APx Acquisition I and Barloworld 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 Barloworld Ltd ADR are associated (or correlated) with APx Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APx Acquisition I has no effect on the direction of Barloworld i.e., Barloworld and APx Acquisition go up and down completely randomly.
Pair Corralation between Barloworld and APx Acquisition
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 8.38 times more return on investment than APx Acquisition. However, Barloworld is 8.38 times more volatile than APx Acquisition I. It trades about 0.15 of its potential returns per unit of risk. APx Acquisition I is currently generating about 0.04 per unit of risk. If you would invest 403.00 in Barloworld Ltd ADR on September 13, 2024 and sell it today you would earn a total of 175.00 from holding Barloworld Ltd ADR or generate 43.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. APx Acquisition I
Performance |
| Timeline |
| Barloworld ADR |
| APx Acquisition I |
Barloworld and APx Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and APx Acquisition
The main advantage of trading using opposite Barloworld and APx Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, APx Acquisition 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 APx Acquisition will offset losses from the drop in APx Acquisition's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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