Correlation Between Barloworld and The Fairholme
Can any of the company-specific risk be diversified away by investing in both Barloworld and The Fairholme 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 The Fairholme 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 The Fairholme Focused, you can compare the effects of market volatilities on Barloworld and The Fairholme 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 The Fairholme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and The Fairholme.
Diversification Opportunities for Barloworld and The Fairholme
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Barloworld and The is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and The Fairholme Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairholme Focused 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 The Fairholme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairholme Focused has no effect on the direction of Barloworld i.e., Barloworld and The Fairholme go up and down completely randomly.
Pair Corralation between Barloworld and The Fairholme
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 10.5 times more return on investment than The Fairholme. However, Barloworld is 10.5 times more volatile than The Fairholme Focused. It trades about 0.02 of its potential returns per unit of risk. The Fairholme Focused is currently generating about 0.04 per unit of risk. If you would invest 537.00 in Barloworld Ltd ADR on January 14, 2025 and sell it today you would lose (12.00) from holding Barloworld Ltd ADR or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 53.66% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. The Fairholme Focused
Performance |
| Timeline |
| Barloworld ADR |
| Fairholme Focused |
Barloworld and The Fairholme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and The Fairholme
The main advantage of trading using opposite Barloworld and The Fairholme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, The Fairholme 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 The Fairholme will offset losses from the drop in The Fairholme's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| The Fairholme vs. Ms Global Fixed | The Fairholme vs. Morningstar Global Income | The Fairholme vs. Tweedy Browne Global | The Fairholme vs. Investec Global Franchise |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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