Correlation Between Barloworld and First Trust
Can any of the company-specific risk be diversified away by investing in both Barloworld and First Trust 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 First Trust 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 First Trust Short, you can compare the effects of market volatilities on Barloworld and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and First Trust.
Diversification Opportunities for Barloworld and First Trust
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Barloworld and First is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Barloworld i.e., Barloworld and First Trust go up and down completely randomly.
Pair Corralation between Barloworld and First Trust
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 40.34 times more return on investment than First Trust. However, Barloworld is 40.34 times more volatile than First Trust Short. It trades about 0.07 of its potential returns per unit of risk. First Trust Short is currently generating about 0.05 per unit of risk. If you would invest 403.00 in Barloworld Ltd ADR on August 26, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. First Trust Short
Performance |
| Timeline |
| Barloworld ADR |
| First Trust Short |
Barloworld and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and First Trust
The main advantage of trading using opposite Barloworld and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| First Trust vs. First Trust Ultra | First Trust vs. First Trust Municipal | First Trust vs. First Trust Managed | First Trust vs. First Trust Institutional |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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