Correlation Between Barloworld and Franklin Mutual
Can any of the company-specific risk be diversified away by investing in both Barloworld and Franklin Mutual 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 Franklin Mutual 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 Franklin Mutual Shares, you can compare the effects of market volatilities on Barloworld and Franklin Mutual 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 Franklin Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Franklin Mutual.
Diversification Opportunities for Barloworld and Franklin Mutual
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Barloworld and Franklin is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Franklin Mutual Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Shares 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 Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Shares has no effect on the direction of Barloworld i.e., Barloworld and Franklin Mutual go up and down completely randomly.
Pair Corralation between Barloworld and Franklin Mutual
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 6.6 times more return on investment than Franklin Mutual. However, Barloworld is 6.6 times more volatile than Franklin Mutual Shares. It trades about 0.07 of its potential returns per unit of risk. Franklin Mutual Shares is currently generating about 0.14 per unit of risk. If you would invest 403.00 in Barloworld Ltd ADR on August 24, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barloworld Ltd ADR vs. Franklin Mutual Shares
Performance |
| Timeline |
| Barloworld ADR |
| Franklin Mutual Shares |
Barloworld and Franklin Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barloworld and Franklin Mutual
The main advantage of trading using opposite Barloworld and Franklin Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Franklin Mutual 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 Franklin Mutual will offset losses from the drop in Franklin Mutual's long position.| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
| Franklin Mutual vs. Saat E Market | Franklin Mutual vs. Saat Aggressive Strategy | Franklin Mutual vs. HUMANA INC | Franklin Mutual vs. Aquagold International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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