Correlation Between Barksdale Resources and Barratt Developments

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

By analyzing existing cross correlation between Barksdale Resources Corp and Barratt Developments PLC, you can compare the effects of market volatilities on Barksdale Resources and Barratt Developments 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 Barksdale Resources with a short position of Barratt Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barksdale Resources and Barratt Developments.

Diversification Opportunities for Barksdale Resources and Barratt Developments

0.3

Correlation Coefficient

Barksdale Resources  Barratt Developments

Weak diversification

The 3 months correlation between Barksdale and Barratt is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Barksdale Resources Corp and Barratt Developments PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barratt Developments PLC and Barksdale Resources 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 Barksdale Resources Corp are associated (or correlated) with Barratt Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barratt Developments PLC has no effect on the direction of Barksdale Resources i.e., Barksdale Resources and Barratt Developments go up and down completely randomly.

Pair Corralation between Barksdale Resources and Barratt Developments

Assuming the 90 days horizon Barksdale Resources Corp is expected to generate 4.13 times more return on investment than Barratt Developments. However, Barksdale Resources is 4.13 times more volatile than Barratt Developments PLC. It trades about 0.05 of its potential returns per unit of risk. Barratt Developments PLC is currently generating about -0.12 per unit of risk. If you would invest  11.00  in Barksdale Resources Corp on September 23, 2024 and sell it today you would earn a total of  1.00  from holding Barksdale Resources Corp or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barksdale Resources Corp  vs.  Barratt Developments PLC

Barksdale Resources Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barksdale Resources Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Barksdale Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Barratt Developments PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barratt Developments PLC 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Barksdale Resources and Barratt Developments

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

The idea behind Barksdale Resources Corp and Barratt Developments PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.