Correlation Between Barloworld and Shelton Green

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

Diversification Opportunities for Barloworld and Shelton Green

0.33

Correlation Coefficient

Barloworld  Shelton Green

Weak diversification

The 24 months correlation between Barloworld and Shelton is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Shelton Green Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton Green Alpha 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 Shelton Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton Green Alpha has no effect on the direction of Barloworld i.e., Barloworld and Shelton Green go up and down completely randomly.

Pair Corralation between Barloworld and Shelton Green

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 8.18 times more return on investment than Shelton Green. However, Barloworld is 8.18 times more volatile than Shelton Green Alpha. It trades about 0.12 of its potential returns per unit of risk. Shelton Green Alpha is currently generating about 0.55 per unit of risk. If you would invest  411.00  in Barloworld Ltd ADR on March 2, 2024 and sell it today you would earn a total of  54.00  from holding Barloworld Ltd ADR or generate 13.14% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Shelton Green Alpha

Barloworld ADR

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Shelton Green Alpha

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shelton Green Alpha are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Shelton Green is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and Shelton Green

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

The idea behind Barloworld Ltd ADR and Shelton Green Alpha 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.