Correlation Between BlackRock and Kingspan Group

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

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

Diversification Opportunities for BlackRock and Kingspan Group

-0.64

Correlation Coefficient

BlackRock  Kingspan Group

Excellent diversification

The 3 months correlation between BlackRock and Kingspan is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Kingspan Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group PLC 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group PLC has no effect on the direction of BlackRock i.e., BlackRock and Kingspan Group go up and down completely randomly.

Pair Corralation between BlackRock and Kingspan Group

Considering the 90-day investment horizon BlackRock is expected to under-perform the Kingspan Group. But the stock apears to be less risky and, when comparing its historical volatility, BlackRock is 1.66 times less risky than Kingspan Group. The stock trades about -0.07 of its potential returns per unit of risk. The Kingspan Group PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,275  in Kingspan Group PLC on December 30, 2024 and sell it today you would earn a total of  1,021  from holding Kingspan Group PLC or generate 14.03% return on investment over 90 days.

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

BlackRock  vs.  Kingspan Group PLC

BlackRock

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kingspan Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kingspan Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Kingspan Group

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

The idea behind BlackRock and Kingspan Group PLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.