Correlation Between Blackrock Government and Westwood High

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

By analyzing existing cross correlation between Blackrock Government Bond and Westwood High Income, you can compare the effects of market volatilities on Blackrock Government and Westwood High 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 Government with a short position of Westwood High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Government and Westwood High.

Diversification Opportunities for Blackrock Government and Westwood High

-0.23

Correlation Coefficient

Blackrock Government  Westwood High

Very good diversification

The 3 months correlation between Blackrock and Westwood is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Government Bond and Westwood High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood High Income and Blackrock Government 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 Government Bond are associated (or correlated) with Westwood High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood High Income has no effect on the direction of Blackrock Government i.e., Blackrock Government and Westwood High go up and down completely randomly.

Pair Corralation between Blackrock Government and Westwood High

Assuming the 90 days horizon Blackrock Government is expected to generate 2.67 times less return on investment than Westwood High. In addition to that, Blackrock Government is 1.27 times more volatile than Westwood High Income. It trades about 0.11 of its total potential returns per unit of risk. Westwood High Income is currently generating about 0.37 per unit of volatility. If you would invest  1,002  in Westwood High Income on September 5, 2024 and sell it today you would earn a total of  23.00  from holding Westwood High Income or generate 2.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Blackrock Government Bond  vs.  Westwood High Income

Blackrock Government Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Government Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Blackrock Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Westwood High Income

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood High Income are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Westwood High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Government and Westwood High

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

The idea behind Blackrock Government Bond and Westwood High Income 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.