Correlation Between BlackRock Energy and BlackRock Health

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

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

Diversification Opportunities for BlackRock Energy and BlackRock Health

0.75

Correlation Coefficient

BlackRock Energy  BlackRock Health

Poor diversification

The 3 months correlation between BlackRock and BlackRock is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Energy and and BlackRock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Health Sciences and BlackRock Energy 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 Energy and are associated (or correlated) with BlackRock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Health Sciences has no effect on the direction of BlackRock Energy i.e., BlackRock Energy and BlackRock Health go up and down completely randomly.

Pair Corralation between BlackRock Energy and BlackRock Health

Considering the 90-day investment horizon BlackRock Energy is expected to generate 7.39 times less return on investment than BlackRock Health. In addition to that, BlackRock Energy is 1.25 times more volatile than BlackRock Health Sciences. It trades about 0.01 of its total potential returns per unit of risk. BlackRock Health Sciences is currently generating about 0.08 per unit of volatility. If you would invest  3,894  in BlackRock Health Sciences on December 1, 2024 and sell it today you would earn a total of  139.00  from holding BlackRock Health Sciences or generate 3.57% return on investment over 90 days.

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

BlackRock Energy and  vs.  BlackRock Health Sciences

BlackRock Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Energy and has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, BlackRock Energy is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

BlackRock Health Sciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Health Sciences are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, BlackRock Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BlackRock Energy and BlackRock Health

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

The idea behind BlackRock Energy and and BlackRock Health Sciences 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.