Correlation Between Barloworld and Johnson Matthey
Can any of the company-specific risk be diversified away by investing in both Barloworld and Johnson Matthey 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 Johnson Matthey 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 Johnson Matthey PLC, you can compare the effects of market volatilities on Barloworld and Johnson Matthey 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 Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Johnson Matthey.
Diversification Opportunities for Barloworld and Johnson Matthey
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Barloworld and Johnson is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Barloworld i.e., Barloworld and Johnson Matthey go up and down completely randomly.
Pair Corralation between Barloworld and Johnson Matthey
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 4.79 times more return on investment than Johnson Matthey. However, Barloworld is 4.79 times more volatile than Johnson Matthey PLC. It trades about 0.07 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.21 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Johnson Matthey PLC
Performance |
| Timeline |
| Barloworld ADR |
| Johnson Matthey PLC |
Barloworld and Johnson Matthey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Johnson Matthey
The main advantage of trading using opposite Barloworld and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Johnson Matthey 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 Johnson Matthey will offset losses from the drop in Johnson Matthey's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Johnson Matthey vs. First Graphene | Johnson Matthey vs. HUMANA INC | Johnson Matthey vs. Aquagold International | Johnson Matthey vs. Barloworld Ltd ADR |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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