Correlation Between Kentucky Tax-free and Barloworld
Can any of the company-specific risk be diversified away by investing in both Kentucky Tax-free and Barloworld 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 Kentucky Tax-free and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kentucky Tax Free Income and Barloworld Ltd ADR, you can compare the effects of market volatilities on Kentucky Tax-free and Barloworld 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 Kentucky Tax-free with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kentucky Tax-free and Barloworld.
Diversification Opportunities for Kentucky Tax-free and Barloworld
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kentucky and Barloworld is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Kentucky Tax Free Income and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Kentucky Tax-free 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 Kentucky Tax Free Income are associated (or correlated) with Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of Kentucky Tax-free i.e., Kentucky Tax-free and Barloworld go up and down completely randomly.
Pair Corralation between Kentucky Tax-free and Barloworld
Assuming the 90 days horizon Kentucky Tax-free is expected to generate 7.31 times less return on investment than Barloworld. But when comparing it to its historical volatility, Kentucky Tax Free Income is 19.13 times less risky than Barloworld. It trades about 0.17 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 403.00 in Barloworld Ltd ADR on August 25, 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 |
Kentucky Tax Free Income vs. Barloworld Ltd ADR
Performance |
| Timeline |
| Kentucky Tax Free |
| Barloworld ADR |
Kentucky Tax-free and Barloworld Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kentucky Tax-free and Barloworld
The main advantage of trading using opposite Kentucky Tax-free and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kentucky Tax-free position performs unexpectedly, Barloworld 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 Barloworld will offset losses from the drop in Barloworld's long position.The idea behind Kentucky Tax Free Income and Barloworld Ltd ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |