Correlation Between Sparta Capital and Barloworld
Can any of the company-specific risk be diversified away by investing in both Sparta Capital 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 Sparta Capital and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparta Capital and Barloworld Ltd ADR, you can compare the effects of market volatilities on Sparta Capital 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 Sparta Capital with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and Barloworld.
Diversification Opportunities for Sparta Capital and Barloworld
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sparta and Barloworld is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Sparta Capital 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 Sparta Capital 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 Sparta Capital i.e., Sparta Capital and Barloworld go up and down completely randomly.
Pair Corralation between Sparta Capital and Barloworld
Assuming the 90 days horizon Sparta Capital is expected to generate 1.52 times more return on investment than Barloworld. However, Sparta Capital is 1.52 times more volatile than Barloworld Ltd ADR. It trades about 0.05 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.03 per unit of risk. If you would invest 0.66 in Sparta Capital on August 26, 2024 and sell it today you would earn a total of 0.84 from holding Sparta Capital or generate 127.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 71.63% |
| Values | Daily Returns |
Sparta Capital vs. Barloworld Ltd ADR
Performance |
| Timeline |
| Sparta Capital |
| Barloworld ADR |
Sparta Capital and Barloworld Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparta Capital and Barloworld
The main advantage of trading using opposite Sparta Capital and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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.| Sparta Capital vs. Copa Holdings SA | Sparta Capital vs. United Airlines Holdings | Sparta Capital vs. Delta Air Lines | Sparta Capital vs. SkyWest |
| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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