Correlation Between Blackstone and Arista Networks

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

By analyzing existing cross correlation between Blackstone Group and Arista Networks, you can compare the effects of market volatilities on Blackstone and Arista Networks 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 Blackstone with a short position of Arista Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackstone and Arista Networks.

Diversification Opportunities for Blackstone and Arista Networks

0.74

Correlation Coefficient

Blackstone  Arista Networks

Poor diversification

The 3 months correlation between Blackstone and Arista is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Blackstone Group and Arista Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arista Networks and Blackstone 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 Blackstone Group are associated (or correlated) with Arista Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arista Networks has no effect on the direction of Blackstone i.e., Blackstone and Arista Networks go up and down completely randomly.

Pair Corralation between Blackstone and Arista Networks

Assuming the 90 days trading horizon Blackstone Group is expected to generate 0.83 times more return on investment than Arista Networks. However, Blackstone Group is 1.2 times less risky than Arista Networks. It trades about 0.31 of its potential returns per unit of risk. Arista Networks is currently generating about 0.2 per unit of risk. If you would invest  12,232  in Blackstone Group on September 5, 2024 and sell it today you would earn a total of  5,768  from holding Blackstone Group or generate 47.16% return on investment over 90 days.

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

Blackstone Group  vs.  Arista Networks

Blackstone Group

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blackstone reported solid returns over the last few months and may actually be approaching a breakup point.

Arista Networks

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arista Networks are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arista Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackstone and Arista Networks

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

The idea behind Blackstone Group and Arista Networks 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.