Correlation Between Blackrock Enhanced and North American

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

By analyzing existing cross correlation between Blackrock Enhanced Equity and North American Financial, you can compare the effects of market volatilities on Blackrock Enhanced and North American 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 Blackrock Enhanced with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Enhanced and North American.

Diversification Opportunities for Blackrock Enhanced and North American

0.9

Correlation Coefficient

Blackrock Enhanced  North American

Almost no diversification

The 3 months correlation between Blackrock and North is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Equity and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and Blackrock Enhanced 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 Blackrock Enhanced Equity are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and North American go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and North American

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 5.39 times less return on investment than North American. But when comparing it to its historical volatility, Blackrock Enhanced Equity is 3.99 times less risky than North American. It trades about 0.15 of its potential returns per unit of risk. North American Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  385.00  in North American Financial on September 3, 2024 and sell it today you would earn a total of  157.00  from holding North American Financial or generate 40.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	92.19%
Values	Daily Returns

Blackrock Enhanced Equity  vs.  North American Financial

Blackrock Enhanced Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively weak fundamental indicators, Blackrock Enhanced may actually be approaching a critical reversion point that can send shares even higher in January 2025.

North American Financial

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Blackrock Enhanced and North American

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

The idea behind Blackrock Enhanced Equity and North American Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..