Correlation Between Barloworld and Distoken Acquisition

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

Diversification Opportunities for Barloworld and Distoken Acquisition

0.06

Correlation Coefficient

Barloworld  Distoken Acquisition

Significant diversification

The 3 months correlation between Barloworld and Distoken is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition 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 Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of Barloworld i.e., Barloworld and Distoken Acquisition go up and down completely randomly.

Pair Corralation between Barloworld and Distoken Acquisition

Assuming the 90 days horizon Barloworld is expected to generate 13.55 times less return on investment than Distoken Acquisition. But when comparing it to its historical volatility, Barloworld Ltd ADR is 4.05 times less risky than Distoken Acquisition. It trades about 0.02 of its potential returns per unit of risk. Distoken Acquisition is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Distoken Acquisition on September 12, 2024 and sell it today you would lose (5.99) from holding Distoken Acquisition or give up 35.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.82%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Distoken Acquisition

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.

Distoken Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Distoken Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Barloworld and Distoken Acquisition

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

The idea behind Barloworld Ltd ADR and Distoken Acquisition 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..