Correlation Between BlackRock and Amazon

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

By analyzing existing cross correlation between BlackRock and Amazon Inc, you can compare the effects of market volatilities on BlackRock and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and Amazon.

Diversification Opportunities for BlackRock and Amazon

0.78

Correlation Coefficient

BlackRock  Amazon

Poor diversification

The 3 months correlation between BlackRock and Amazon is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of BlackRock i.e., BlackRock and Amazon go up and down completely randomly.

Pair Corralation between BlackRock and Amazon

Assuming the 90 days trading horizon BlackRock is expected to generate 0.92 times more return on investment than Amazon. However, BlackRock is 1.09 times less risky than Amazon. It trades about 0.22 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.19 per unit of risk. If you would invest  1,665,143  in BlackRock on September 27, 2024 and sell it today you would earn a total of  444,857  from holding BlackRock or generate 26.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

BlackRock  vs.  Amazon Inc

BlackRock

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 17 (%) 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.

Amazon Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Amazon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Amazon

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

The idea behind BlackRock and Amazon Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.