Correlation Between Barloworld and EA Series

Can any of the company-specific risk be diversified away by investing in both Barloworld and EA Series 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 EA Series 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 EA Series Trust, you can compare the effects of market volatilities on Barloworld and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and EA Series.

Diversification Opportunities for Barloworld and EA Series

-0.2

Correlation Coefficient

Barloworld  EA Series

Good diversification

The 3 months correlation between Barloworld and BUXX is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Barloworld i.e., Barloworld and EA Series go up and down completely randomly.

Pair Corralation between Barloworld and EA Series

Assuming the 90 days horizon Barloworld is expected to generate 1.22 times less return on investment than EA Series. In addition to that, Barloworld is 58.36 times more volatile than EA Series Trust. It trades about 0.0 of its total potential returns per unit of risk. EA Series Trust is currently generating about 0.29 per unit of volatility. If you would invest  2,004  in EA Series Trust on September 4, 2024 and sell it today you would earn a total of  27.00  from holding EA Series Trust or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Barloworld Ltd ADR  vs.  EA Series Trust

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 fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EA Series Trust

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, EA Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barloworld and EA Series

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

The idea behind Barloworld Ltd ADR and EA Series Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.