Correlation Between Barloworld and Croda International
Can any of the company-specific risk be diversified away by investing in both Barloworld and Croda International 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 Croda International 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 Croda International PLC, you can compare the effects of market volatilities on Barloworld and Croda International 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 Croda International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Croda International.
Diversification Opportunities for Barloworld and Croda International
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Barloworld and Croda is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Croda International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croda International PLC 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 Croda International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croda International PLC has no effect on the direction of Barloworld i.e., Barloworld and Croda International go up and down completely randomly.
Pair Corralation between Barloworld and Croda International
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 2.54 times more return on investment than Croda International. However, Barloworld is 2.54 times more volatile than Croda International PLC. It trades about 0.07 of its potential returns per unit of risk. Croda International PLC is currently generating about -0.12 per unit of risk. If you would invest 403.00 in Barloworld Ltd ADR on August 29, 2024 and sell it today you would earn a total of 20.00 from holding Barloworld Ltd ADR or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Croda International PLC
Performance |
| Timeline |
| Barloworld ADR |
| Croda International PLC |
Barloworld and Croda International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Croda International
The main advantage of trading using opposite Barloworld and Croda International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Croda International 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 Croda International will offset losses from the drop in Croda International's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Croda International vs. PPG Industries | Croda International vs. Ecolab Inc | Croda International vs. Sherwin Williams Co | Croda International vs. Air Products and |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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