Correlation Between Aama Equity and Barloworld

Can any of the company-specific risk be diversified away by investing in both Aama Equity 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 Aama Equity and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aama Equity Fund and Barloworld Ltd ADR, you can compare the effects of market volatilities on Aama Equity 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 Aama Equity with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aama Equity and Barloworld.

Diversification Opportunities for Aama Equity and Barloworld

0.0

Correlation Coefficient

Aama Equity  Barloworld

Pay attention - limited upside

The 3 months correlation between Aama and Barloworld is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aama Equity Fund and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Aama Equity 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 Aama Equity Fund 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 Aama Equity i.e., Aama Equity and Barloworld go up and down completely randomly.

Pair Corralation between Aama Equity and Barloworld

If you would invest  354.00  in Barloworld Ltd ADR on February 27, 2024 and sell it today you would earn a total of  111.00  from holding Barloworld Ltd ADR or generate 31.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Aama Equity Fund  vs.  Barloworld Ltd ADR

Aama Equity Fund

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Aama Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Aama Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Barloworld ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aama Equity and Barloworld

The main advantage of trading using opposite Aama Equity and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aama Equity 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 Aama Equity Fund 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.