Correlation Between Macarthur Minerals and Barloworld

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

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

Diversification Opportunities for Macarthur Minerals and Barloworld

-0.12

Correlation Coefficient

Macarthur Minerals  Barloworld

Good diversification

The 3 months correlation between Macarthur and Barloworld is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Macarthur Minerals Limited and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Macarthur Minerals 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 Macarthur Minerals Limited 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 Macarthur Minerals i.e., Macarthur Minerals and Barloworld go up and down completely randomly.

Pair Corralation between Macarthur Minerals and Barloworld

Assuming the 90 days horizon Macarthur Minerals Limited is expected to under-perform the Barloworld. But the otc stock apears to be less risky and, when comparing its historical volatility, Macarthur Minerals Limited is 1.11 times less risky than Barloworld. The otc stock trades about -0.03 of its potential returns per unit of risk. The Barloworld Ltd ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  428.00  in Barloworld Ltd ADR on March 19, 2024 and sell it today you would earn a total of  47.00  from holding Barloworld Ltd ADR or generate 10.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.66%
Values	Daily Returns

Macarthur Minerals Limited  vs.  Barloworld Ltd ADR

Macarthur Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macarthur Minerals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Barloworld ADR

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 21 (%) 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.

Pair Trading with Macarthur Minerals and Barloworld

The main advantage of trading using opposite Macarthur Minerals and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macarthur Minerals 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 Macarthur Minerals Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.