Correlation Between BlackRock and CareRx

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

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

Diversification Opportunities for BlackRock and CareRx

-0.63

Correlation Coefficient

BlackRock  CareRx

Excellent diversification

The 3 months correlation between BlackRock and CareRx is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and CareRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRx 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 CareRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRx has no effect on the direction of BlackRock i.e., BlackRock and CareRx go up and down completely randomly.

Pair Corralation between BlackRock and CareRx

Considering the 90-day investment horizon BlackRock is expected to generate 0.43 times more return on investment than CareRx. However, BlackRock is 2.33 times less risky than CareRx. It trades about 0.07 of its potential returns per unit of risk. CareRx is currently generating about 0.0 per unit of risk. If you would invest  66,826  in BlackRock on October 21, 2024 and sell it today you would earn a total of  33,670  from holding BlackRock or generate 50.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.43%
Values	Daily Returns

BlackRock  vs.  CareRx

BlackRock

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, BlackRock is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CareRx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CareRx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, CareRx is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BlackRock and CareRx

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

The idea behind BlackRock and CareRx 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.