Correlation Between BlackRock and Edible Garden

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

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

Diversification Opportunities for BlackRock and Edible Garden

-0.14

Correlation Coefficient

BlackRock  Edible Garden

Good diversification

The 3 months correlation between BlackRock and Edible is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Edible Garden AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edible Garden AG 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 Edible Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edible Garden AG has no effect on the direction of BlackRock i.e., BlackRock and Edible Garden go up and down completely randomly.

Pair Corralation between BlackRock and Edible Garden

Considering the 90-day investment horizon BlackRock is expected to under-perform the Edible Garden. But the stock apears to be less risky and, when comparing its historical volatility, BlackRock is 18.08 times less risky than Edible Garden. The stock trades about -0.05 of its potential returns per unit of risk. The Edible Garden AG is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Edible Garden AG on October 5, 2024 and sell it today you would earn a total of  15.00  from holding Edible Garden AG or generate 88.24% return on investment over 90 days.

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

BlackRock  vs.  Edible Garden AG

BlackRock

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Edible Garden AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Edible Garden disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Edible Garden

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

The idea behind BlackRock and Edible Garden AG 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.