Correlation Between Barloworld and American Beacon
Can any of the company-specific risk be diversified away by investing in both Barloworld and American Beacon 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 American Beacon 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 American Beacon Stephens, you can compare the effects of market volatilities on Barloworld and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and American Beacon.
Diversification Opportunities for Barloworld and American Beacon
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Barloworld and American is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and American Beacon Stephens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Stephens 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Stephens has no effect on the direction of Barloworld i.e., Barloworld and American Beacon go up and down completely randomly.
Pair Corralation between Barloworld and American Beacon
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 8.94 times more return on investment than American Beacon. However, Barloworld is 8.94 times more volatile than American Beacon Stephens. It trades about 0.06 of its potential returns per unit of risk. American Beacon Stephens is currently generating about 0.25 per unit of risk. If you would invest 590.00 in Barloworld Ltd ADR on October 21, 2024 and sell it today you would earn a total of 23.00 from holding Barloworld Ltd ADR or generate 3.9% 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. American Beacon Stephens
Performance |
| Timeline |
| Barloworld ADR |
| American Beacon Stephens |
Barloworld and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and American Beacon
The main advantage of trading using opposite Barloworld and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| American Beacon vs. American Beacon Ssi | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Bridgeway | American Beacon vs. American Beacon Twentyfour |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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