Correlation Between Mill City and Barloworld

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

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

Diversification Opportunities for Mill City and Barloworld

-0.07

Correlation Coefficient

Mill City  Barloworld

Good diversification

The 3 months correlation between Mill and Barloworld is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mill City 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 Mill City 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 Mill City 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 Mill City i.e., Mill City and Barloworld go up and down completely randomly.

Pair Corralation between Mill City and Barloworld

Given the investment horizon of 90 days Mill City Ventures is expected to under-perform the Barloworld. But the stock apears to be less risky and, when comparing its historical volatility, Mill City Ventures is 1.52 times less risky than Barloworld. The stock trades about -0.16 of its potential returns per unit of risk. The Barloworld Ltd ADR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  403.00  in Barloworld Ltd ADR on September 13, 2024 and sell it today you would earn a total of  222.00  from holding Barloworld Ltd ADR or generate 55.09% return on investment over 90 days.

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

Mill City Ventures  vs.  Barloworld Ltd ADR

Mill City Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mill City Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Mill City and Barloworld

The main advantage of trading using opposite Mill City and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mill City 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 Mill City 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.