Correlation Between Barloworld and Bri Chem

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Can any of the company-specific risk be diversified away by investing in both Barloworld and Bri Chem 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 Bri Chem 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 Bri Chem Corp, you can compare the effects of market volatilities on Barloworld and Bri Chem 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 Bri Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Bri Chem.

Diversification Opportunities for Barloworld and Bri Chem

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between Barloworld and Bri is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp 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 Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of Barloworld i.e., Barloworld and Bri Chem go up and down completely randomly.

Pair Corralation between Barloworld and Bri Chem

Assuming the 90 days horizon Barloworld is expected to generate 1.55 times less return on investment than Bri Chem. In addition to that, Barloworld is 1.08 times more volatile than Bri Chem Corp. It trades about 0.23 of its total potential returns per unit of risk. Bri Chem Corp is currently generating about 0.39 per unit of volatility. If you would invest  14.00  in Bri Chem Corp on September 19, 2024 and sell it today you would earn a total of  10.00  from holding Bri Chem Corp or generate 71.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Barloworld Ltd ADR  vs.  Bri Chem Corp

 Performance 
       Timeline  
Barloworld ADR 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
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.
Bri Chem Corp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Bri Chem reported solid returns over the last few months and may actually be approaching a breakup point.

Barloworld and Bri Chem Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Barloworld and Bri Chem

The main advantage of trading using opposite Barloworld and Bri Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Bri Chem 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 Bri Chem will offset losses from the drop in Bri Chem's long position.
The idea behind Barloworld Ltd ADR and Bri Chem Corp 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.
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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