Correlation Between BlackRock and Alfa SAB

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

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

Diversification Opportunities for BlackRock and Alfa SAB

0.59

Correlation Coefficient

BlackRock  Alfa SAB

Very weak diversification

The 3 months correlation between BlackRock and Alfa is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de and BlackRock 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 are associated (or correlated) with Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of BlackRock i.e., BlackRock and Alfa SAB go up and down completely randomly.

Pair Corralation between BlackRock and Alfa SAB

Assuming the 90 days trading horizon BlackRock is expected to under-perform the Alfa SAB. But the stock apears to be less risky and, when comparing its historical volatility, BlackRock is 1.68 times less risky than Alfa SAB. The stock trades about -0.09 of its potential returns per unit of risk. The Alfa SAB de is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Alfa SAB de on September 24, 2024 and sell it today you would earn a total of  14.00  from holding Alfa SAB de or generate 0.93% return on investment over 90 days.

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

BlackRock  vs.  Alfa SAB de

BlackRock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BlackRock showed solid returns over the last few months and may actually be approaching a breakup point.

Alfa SAB de

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Alfa SAB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BlackRock and Alfa SAB

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

The idea behind BlackRock and Alfa SAB de 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.