Correlation Between Barloworld and American Express
Can any of the company-specific risk be diversified away by investing in both Barloworld and American Express 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 American Express 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 American Express, you can compare the effects of market volatilities on Barloworld and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and American Express.
Diversification Opportunities for Barloworld and American Express
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Barloworld and American is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Barloworld i.e., Barloworld and American Express go up and down completely randomly.
Pair Corralation between Barloworld and American Express
Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 6.65 times more return on investment than American Express. However, Barloworld is 6.65 times more volatile than American Express. It trades about 0.05 of its potential returns per unit of risk. American Express is currently generating about 0.04 per unit of risk. If you would invest 470.00 in Barloworld Ltd ADR on January 24, 2024 and sell it today you would lose (116.00) from holding Barloworld Ltd ADR or give up 24.68% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 94.55% |
Values | Daily Returns |
Barloworld Ltd ADR vs. American Express
Performance |
Timeline |
Barloworld ADR |
American Express |
Barloworld and American Express Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Barloworld and American Express
The main advantage of trading using opposite Barloworld and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.Barloworld vs. United Rentals | Barloworld vs. AerCap Holdings NV | Barloworld vs. U Haul Holding | Barloworld vs. U Haul Holding |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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