Correlation Between EA Series and Barloworld

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

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

Diversification Opportunities for EA Series and Barloworld

-0.03

Correlation Coefficient

EA Series  Barloworld

Good diversification

The 3 months correlation between DRLL and Barloworld is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and EA Series 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 EA Series Trust 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 EA Series i.e., EA Series and Barloworld go up and down completely randomly.

Pair Corralation between EA Series and Barloworld

Given the investment horizon of 90 days EA Series Trust is expected to under-perform the Barloworld. But the etf apears to be less risky and, when comparing its historical volatility, EA Series Trust is 6.13 times less risky than Barloworld. The etf trades about -0.07 of its potential returns per unit of risk. The Barloworld Ltd ADR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  354.00  in Barloworld Ltd ADR on February 21, 2024 and sell it today you would earn a total of  80.00  from holding Barloworld Ltd ADR or generate 22.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

EA Series Trust  vs.  Barloworld Ltd ADR

EA Series Trust

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal essential indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Barloworld ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Barloworld may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with EA Series and Barloworld

The main advantage of trading using opposite EA Series and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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 EA Series Trust 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .