Correlation Between Barloworld and Capital World
Can any of the company-specific risk be diversified away by investing in both Barloworld and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Barloworld and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Capital World.
Diversification Opportunities for Barloworld and Capital World
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Barloworld and Capital is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Barloworld i.e., Barloworld and Capital World go up and down completely randomly.
Pair Corralation between Barloworld and Capital World
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 15.04 times more return on investment than Capital World. However, Barloworld is 15.04 times more volatile than Capital World Bond. It trades about 0.04 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of risk. If you would invest 455.00 in Barloworld Ltd ADR on November 27, 2024 and sell it today you would earn a total of 70.00 from holding Barloworld Ltd ADR or generate 15.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 34.61% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Capital World Bond
Performance |
| Timeline |
| Barloworld ADR |
| Capital World Bond |
Barloworld and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Capital World
The main advantage of trading using opposite Barloworld and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Capital World vs. Us Government Securities | Capital World vs. Transamerica Funds | Capital World vs. Aig Government Money | Capital World vs. Us Government Securities |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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