Correlation Between BLK and AE

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

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

Diversification Opportunities for BLK and AE

0.57

Correlation Coefficient

BLK  AE

Very weak diversification

The 3 months correlation between BLK and AE is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BLK and AE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AE and BLK 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 BLK are associated (or correlated) with AE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AE has no effect on the direction of BLK i.e., BLK and AE go up and down completely randomly.

Pair Corralation between BLK and AE

Assuming the 90 days trading horizon BLK is expected to generate 0.42 times more return on investment than AE. However, BLK is 2.41 times less risky than AE. It trades about -0.06 of its potential returns per unit of risk. AE is currently generating about -0.22 per unit of risk. If you would invest  2.92  in BLK on December 20, 2024 and sell it today you would lose (0.31) from holding BLK or give up 10.62% of portfolio value over 90 days.

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

BLK  vs.  AE

BLK

Risk-Adjusted Performance

Very Weak

Over the last 90 days BLK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for BLK shareholders.

AE

Risk-Adjusted Performance

Very Weak

Over the last 90 days AE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for AE shareholders.

Pair Trading with BLK and AE

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

The idea behind BLK and AE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.