Correlation Between Barloworld and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Barloworld and Sterling Capital 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 Sterling Capital 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 Sterling Capital Short, you can compare the effects of market volatilities on Barloworld and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Sterling Capital.
Diversification Opportunities for Barloworld and Sterling Capital
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Barloworld and Sterling is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Sterling Capital Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Short 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Short has no effect on the direction of Barloworld i.e., Barloworld and Sterling Capital go up and down completely randomly.
Pair Corralation between Barloworld and Sterling Capital
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 29.11 times more return on investment than Sterling Capital. However, Barloworld is 29.11 times more volatile than Sterling Capital Short. It trades about 0.02 of its potential returns per unit of risk. Sterling Capital Short is currently generating about 0.18 per unit of risk. If you would invest 410.00 in Barloworld Ltd ADR on September 1, 2024 and sell it today you would earn a total of 13.00 from holding Barloworld Ltd ADR or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 67.29% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Sterling Capital Short
Performance |
| Timeline |
| Barloworld ADR |
| Sterling Capital Short |
Barloworld and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Sterling Capital
The main advantage of trading using opposite Barloworld and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Sterling Capital vs. Sterling Capital Equity | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital South | Sterling Capital vs. Sterling Capital South |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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