Correlation Between Permanent Portfolio and Barloworld

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Can any of the company-specific risk be diversified away by investing in both Permanent Portfolio 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 Permanent Portfolio and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permanent Portfolio Class and Barloworld Ltd ADR, you can compare the effects of market volatilities on Permanent Portfolio 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 Permanent Portfolio with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permanent Portfolio and Barloworld.

Diversification Opportunities for Permanent Portfolio and Barloworld

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between PERMANENT and Barloworld is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Permanent Portfolio Class and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Permanent Portfolio 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 Permanent Portfolio Class 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 Permanent Portfolio i.e., Permanent Portfolio and Barloworld go up and down completely randomly.

Pair Corralation between Permanent Portfolio and Barloworld

Assuming the 90 days horizon Permanent Portfolio is expected to generate 2.69 times less return on investment than Barloworld. But when comparing it to its historical volatility, Permanent Portfolio Class is 9.46 times less risky than Barloworld. It trades about 0.24 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 September 1, 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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Permanent Portfolio Class  vs.  Barloworld Ltd ADR

 Performance 
       Timeline  
Permanent Portfolio Class 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Permanent Portfolio Class are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Permanent Portfolio may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Barloworld ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Barloworld Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Permanent Portfolio and Barloworld Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Permanent Portfolio and Barloworld

The main advantage of trading using opposite Permanent Portfolio and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permanent Portfolio 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 Permanent Portfolio Class 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.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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