Correlation Between Barloworld and International Consolidated
Can any of the company-specific risk be diversified away by investing in both Barloworld and International Consolidated 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 International Consolidated 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 International Consolidated Airlines, you can compare the effects of market volatilities on Barloworld and International Consolidated 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 International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and International Consolidated.
Diversification Opportunities for Barloworld and International Consolidated
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barloworld and International is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Barloworld i.e., Barloworld and International Consolidated go up and down completely randomly.
Pair Corralation between Barloworld and International Consolidated
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 5.26 times more return on investment than International Consolidated. However, Barloworld is 5.26 times more volatile than International Consolidated Airlines. It trades about 0.23 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.62 per unit of risk. If you would invest 423.00 in Barloworld Ltd ADR on September 19, 2024 and sell it today you would earn a total of 167.00 from holding Barloworld Ltd ADR or generate 39.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. International Consolidated Air
Performance |
| Timeline |
| Barloworld ADR |
| International Consolidated |
Barloworld and International Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and International Consolidated
The main advantage of trading using opposite Barloworld and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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