Correlation Between BlackRock and Investor

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

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

Diversification Opportunities for BlackRock and Investor

-0.58

Correlation Coefficient

BlackRock  Investor

Excellent diversification

The 3 months correlation between BlackRock and Investor is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Investor AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB 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 Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB has no effect on the direction of BlackRock i.e., BlackRock and Investor go up and down completely randomly.

Pair Corralation between BlackRock and Investor

Considering the 90-day investment horizon BlackRock is expected to generate 1.1 times more return on investment than Investor. However, BlackRock is 1.1 times more volatile than Investor AB. It trades about 0.13 of its potential returns per unit of risk. Investor AB is currently generating about -0.17 per unit of risk. If you would invest  93,603  in BlackRock on October 7, 2024 and sell it today you would earn a total of  8,480  from holding BlackRock or generate 9.06% return on investment over 90 days.

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

BlackRock  vs.  Investor AB

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.

Investor AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BlackRock and Investor

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

The idea behind BlackRock and Investor AB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.