Correlation Between Barloworld and Hennessy
Can any of the company-specific risk be diversified away by investing in both Barloworld and Hennessy 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 Hennessy 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 Hennessy Bp Energy, you can compare the effects of market volatilities on Barloworld and Hennessy 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 Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Hennessy.
Diversification Opportunities for Barloworld and Hennessy
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Barloworld and Hennessy is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy 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 Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Barloworld i.e., Barloworld and Hennessy go up and down completely randomly.
Pair Corralation between Barloworld and Hennessy
Assuming the 90 days horizon Barloworld is expected to generate 1.13 times less return on investment than Hennessy. In addition to that, Barloworld is 4.39 times more volatile than Hennessy Bp Energy. It trades about 0.07 of its total potential returns per unit of risk. Hennessy Bp Energy is currently generating about 0.33 per unit of volatility. If you would invest 2,608 in Hennessy Bp Energy on August 29, 2024 and sell it today you would earn a total of 247.00 from holding Hennessy Bp Energy or generate 9.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Hennessy Bp Energy
Performance |
| Timeline |
| Barloworld ADR |
| Hennessy Bp Energy |
Barloworld and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Hennessy
The main advantage of trading using opposite Barloworld and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Hennessy 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 Hennessy will offset losses from the drop in Hennessy's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Hennessy vs. HUMANA INC | Hennessy vs. Aquagold International | Hennessy vs. Barloworld Ltd ADR | Hennessy vs. Morningstar Unconstrained Allocation |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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