Correlation Between Barloworld and Ares Commercial

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

Diversification Opportunities for Barloworld and Ares Commercial

0.79

Correlation Coefficient

Barloworld  Ares Commercial

Poor diversification

The 3 months correlation between Barloworld and Ares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Ares Commercial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Commercial Real 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 Ares Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Commercial Real has no effect on the direction of Barloworld i.e., Barloworld and Ares Commercial go up and down completely randomly.

Pair Corralation between Barloworld and Ares Commercial

If you would invest  354.00  in Barloworld Ltd ADR on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Barloworld Ltd ADR or generate 0.0% return on investment over 90 days.

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

Barloworld Ltd ADR  vs.  Ares Commercial Real

Barloworld ADR

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Ares Commercial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ares Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Barloworld and Ares Commercial

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

The idea behind Barloworld Ltd ADR and Ares Commercial Real 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.