Correlation Between Barloworld and IShares ESG

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

Diversification Opportunities for Barloworld and IShares ESG

-0.5

Correlation Coefficient

Barloworld  IShares ESG

Very good diversification

The 3 months correlation between Barloworld and IShares is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Barloworld i.e., Barloworld and IShares ESG go up and down completely randomly.

Pair Corralation between Barloworld and IShares ESG

Assuming the 90 days horizon Barloworld is expected to generate 2.84 times less return on investment than IShares ESG. In addition to that, Barloworld is 3.68 times more volatile than iShares ESG Aware. It trades about 0.0 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about 0.04 per unit of volatility. If you would invest  3,369  in iShares ESG Aware on September 4, 2024 and sell it today you would earn a total of  94.00  from holding iShares ESG Aware or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Barloworld Ltd ADR  vs.  iShares ESG Aware

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.

iShares ESG Aware

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Barloworld and IShares ESG

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

The idea behind Barloworld Ltd ADR and iShares ESG Aware 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.