Correlation Between Pinnacle Sherman and Barloworld

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

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

Diversification Opportunities for Pinnacle Sherman and Barloworld

-0.8

Correlation Coefficient

Pinnacle Sherman  Barloworld

Pay attention - limited upside

The 3 months correlation between Pinnacle and Barloworld is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Sherman Multi Strateg and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Pinnacle Sherman 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 Pinnacle Sherman Multi Strategy 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 Pinnacle Sherman i.e., Pinnacle Sherman and Barloworld go up and down completely randomly.

Pair Corralation between Pinnacle Sherman and Barloworld

Assuming the 90 days horizon Pinnacle Sherman is expected to generate 20.95 times less return on investment than Barloworld. But when comparing it to its historical volatility, Pinnacle Sherman Multi Strategy is 14.99 times less risky than Barloworld. It trades about 0.04 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  502.00  in Barloworld Ltd ADR on January 19, 2024 and sell it today you would lose (148.00) from holding Barloworld Ltd ADR or give up 29.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.34%
Values	Daily Returns

Pinnacle Sherman Multi Strateg  vs.  Barloworld Ltd ADR

Pinnacle Sherman Multi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Sherman Multi Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Pinnacle Sherman is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Pinnacle Sherman and Barloworld

The main advantage of trading using opposite Pinnacle Sherman and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Sherman 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 Pinnacle Sherman Multi Strategy 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 Transaction History module to view history of all your transactions and understand their impact on performance.