Correlation Between Aeon Ventures and Barloworld

Can any of the company-specific risk be diversified away by investing in both Aeon Ventures and Barloworld 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 Aeon Ventures and Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aeon Ventures and Barloworld Ltd ADR, you can compare the effects of market volatilities on Aeon Ventures and Barloworld 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 Aeon Ventures with a short position of Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeon Ventures and Barloworld.

Diversification Opportunities for Aeon Ventures and Barloworld

-0.09

Correlation Coefficient

Aeon Ventures  Barloworld

Good diversification

The 3 months correlation between Aeon and Barloworld is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aeon Ventures and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR and Aeon Ventures 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 Aeon Ventures are associated (or correlated) with Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of Aeon Ventures i.e., Aeon Ventures and Barloworld go up and down completely randomly.

Pair Corralation between Aeon Ventures and Barloworld

Given the investment horizon of 90 days Aeon Ventures is expected to generate 3.47 times more return on investment than Barloworld. However, Aeon Ventures is 3.47 times more volatile than Barloworld Ltd ADR. It trades about 0.08 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.12 per unit of risk. If you would invest  0.81  in Aeon Ventures on September 15, 2024 and sell it today you would earn a total of  0.19  from holding Aeon Ventures or generate 23.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Aeon Ventures  vs.  Barloworld Ltd ADR

Aeon Ventures

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aeon Ventures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Aeon Ventures sustained solid returns over the last few months and may actually be approaching a breakup point.

Barloworld ADR

Risk-Adjusted Performance

9 of 100

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.

Pair Trading with Aeon Ventures and Barloworld

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

The idea behind Aeon Ventures and Barloworld Ltd 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.