Correlation Between Arax Holdings and Barloworld

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

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

Diversification Opportunities for Arax Holdings and Barloworld

-0.35

Correlation Coefficient

Arax Holdings  Barloworld

Very good diversification

The 3 months correlation between Arax and Barloworld is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Arax Holdings Corp and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Arax Holdings 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 Arax Holdings Corp 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 Arax Holdings i.e., Arax Holdings and Barloworld go up and down completely randomly.

Pair Corralation between Arax Holdings and Barloworld

Given the investment horizon of 90 days Arax Holdings Corp is expected to generate 2.34 times more return on investment than Barloworld. However, Arax Holdings is 2.34 times more volatile than Barloworld Ltd ADR. It trades about 0.05 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.05 per unit of risk. If you would invest  100.00  in Arax Holdings Corp on September 14, 2024 and sell it today you would lose (47.00) from holding Arax Holdings Corp or give up 47.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.12%
Values	Daily Returns

Arax Holdings Corp  vs.  Barloworld Ltd ADR

Arax Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arax Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Barloworld ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Barloworld showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arax Holdings and Barloworld

The main advantage of trading using opposite Arax Holdings and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arax Holdings 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 Arax Holdings Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.