Correlation Between AerCap Holdings and Barloworld

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Can any of the company-specific risk be diversified away by investing in both AerCap Holdings 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 AerCap Holdings and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AerCap Holdings NV and Barloworld Ltd ADR, you can compare the effects of market volatilities on AerCap Holdings 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 AerCap Holdings with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of AerCap Holdings and Barloworld.

Diversification Opportunities for AerCap Holdings and Barloworld

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between AerCap and Barloworld is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and AerCap Holdings 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 AerCap Holdings NV 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 AerCap Holdings i.e., AerCap Holdings and Barloworld go up and down completely randomly.

Pair Corralation between AerCap Holdings and Barloworld

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 0.57 times more return on investment than Barloworld. However, AerCap Holdings NV is 1.76 times less risky than Barloworld. It trades about 0.0 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about -0.21 per unit of risk. If you would invest  9,331  in AerCap Holdings NV on April 25, 2024 and sell it today you would lose (10.00) from holding AerCap Holdings NV or give up 0.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

AerCap Holdings NV  vs.  Barloworld Ltd ADR

 Performance 
       Timeline  
AerCap Holdings NV 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in August 2024.
Barloworld ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Barloworld Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AerCap Holdings and Barloworld Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AerCap Holdings and Barloworld

The main advantage of trading using opposite AerCap Holdings and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AerCap Holdings 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 AerCap Holdings NV 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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