Correlation Between Barloworld and Grayscale Litecoin

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

Diversification Opportunities for Barloworld and Grayscale Litecoin

0.26

Correlation Coefficient

Barloworld  Grayscale Litecoin

Modest diversification

The 3 months correlation between Barloworld and Grayscale is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Grayscale Litecoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Litecoin 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 Grayscale Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Litecoin Trust has no effect on the direction of Barloworld i.e., Barloworld and Grayscale Litecoin go up and down completely randomly.

Pair Corralation between Barloworld and Grayscale Litecoin

Assuming the 90 days horizon Barloworld Ltd ADR is expected to generate 0.76 times more return on investment than Grayscale Litecoin. However, Barloworld Ltd ADR is 1.32 times less risky than Grayscale Litecoin. It trades about 0.23 of its potential returns per unit of risk. Grayscale Litecoin Trust is currently generating about 0.07 per unit of risk. If you would invest  423.00  in Barloworld Ltd ADR on September 21, 2024 and sell it today you would earn a total of  167.00  from holding Barloworld Ltd ADR or generate 39.48% return on investment over 90 days.

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

Barloworld Ltd ADR  vs.  Grayscale Litecoin Trust

Barloworld ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barloworld Ltd ADR are ranked lower than 10 (%) 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.

Grayscale Litecoin Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Litecoin Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Grayscale Litecoin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barloworld and Grayscale Litecoin

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

The idea behind Barloworld Ltd ADR and Grayscale Litecoin 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.