Correlation Between Barloworld and Bridgestone Corp

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Barloworld and Bridgestone Corp 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 Bridgestone Corp 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 Bridgestone Corp ADR, you can compare the effects of market volatilities on Barloworld and Bridgestone Corp 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 Bridgestone Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Bridgestone Corp.

Diversification Opportunities for Barloworld and Bridgestone Corp

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Barloworld and Bridgestone is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Bridgestone Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgestone Corp ADR 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 Bridgestone Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgestone Corp ADR has no effect on the direction of Barloworld i.e., Barloworld and Bridgestone Corp go up and down completely randomly.

Pair Corralation between Barloworld and Bridgestone Corp

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 9.1 times more return on investment than Bridgestone Corp. However, Barloworld is 9.1 times more volatile than Bridgestone Corp ADR. It trades about 0.22 of its potential returns per unit of risk. Bridgestone Corp ADR is currently generating about 0.0 per unit of risk. If you would invest  423.00  in Barloworld Ltd ADR on September 16, 2024 and sell it today you would earn a total of  155.00  from holding Barloworld Ltd ADR or generate 36.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Barloworld Ltd ADR  vs.  Bridgestone Corp ADR

 Performance 
       Timeline  
Barloworld ADR 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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.
Bridgestone Corp ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bridgestone Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Barloworld and Bridgestone Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Barloworld and Bridgestone Corp

The main advantage of trading using opposite Barloworld and Bridgestone Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barloworld position performs unexpectedly, Bridgestone Corp 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 Bridgestone Corp will offset losses from the drop in Bridgestone Corp's long position.
The idea behind Barloworld Ltd ADR and Bridgestone Corp 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.
Check out your portfolio center.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

Other Complementary Tools

Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators