Correlation Between Barloworld and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both Barloworld and GE Aerospace 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 GE Aerospace 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 GE Aerospace, you can compare the effects of market volatilities on Barloworld and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and GE Aerospace.
Diversification Opportunities for Barloworld and GE Aerospace
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barloworld and GE Aerospace is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Barloworld i.e., Barloworld and GE Aerospace go up and down completely randomly.
Pair Corralation between Barloworld and GE Aerospace
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 4.23 times more return on investment than GE Aerospace. However, Barloworld is 4.23 times more volatile than GE Aerospace. It trades about 0.12 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.07 per unit of risk. If you would invest 354.00 in Barloworld Ltd ADR on March 15, 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 | Moves Together |
Strength | Significant |
Accuracy | 97.62% |
Values | Daily Returns |
Barloworld Ltd ADR vs. GE Aerospace
Performance |
Timeline |
Barloworld ADR |
GE Aerospace |
Barloworld and GE Aerospace Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Barloworld and GE Aerospace
The main advantage of trading using opposite Barloworld and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.Barloworld vs. African Discovery Group | Barloworld vs. Black Diamond Group | Barloworld vs. Alta Equipment Group | Barloworld vs. Air Lease |
GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Parker Hannifin | GE Aerospace vs. Emerson Electric |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |