Correlation Between Barloworld and Dios Exploration

Can any of the company-specific risk be diversified away by investing in both Barloworld and Dios Exploration 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 Dios Exploration 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 Dios Exploration, you can compare the effects of market volatilities on Barloworld and Dios Exploration 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 Dios Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Dios Exploration.

Diversification Opportunities for Barloworld and Dios Exploration

0.0

Correlation Coefficient

Barloworld  Dios Exploration

Pay attention - limited upside

The 3 months correlation between Barloworld and Dios is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Dios Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dios Exploration 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 Dios Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dios Exploration has no effect on the direction of Barloworld i.e., Barloworld and Dios Exploration go up and down completely randomly.

Pair Corralation between Barloworld and Dios Exploration

If you would invest  357.00  in Barloworld Ltd ADR on March 4, 2024 and sell it today you would earn a total of  108.00  from holding Barloworld Ltd ADR or generate 30.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Dios Exploration

Barloworld ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Dios Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dios Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dios Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Barloworld and Dios Exploration

The main advantage of trading using opposite Barloworld and Dios Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Dios Exploration 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 Dios Exploration will offset losses from the drop in Dios Exploration's long position.

The idea behind Barloworld Ltd ADR and Dios Exploration 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.