Correlation Between BlackRock and Nextmart

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

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

Diversification Opportunities for BlackRock and Nextmart

-0.4

Correlation Coefficient

BlackRock  Nextmart

Very good diversification

The 3 months correlation between BlackRock and Nextmart is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Nextmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextmart 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 Nextmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextmart has no effect on the direction of BlackRock i.e., BlackRock and Nextmart go up and down completely randomly.

Pair Corralation between BlackRock and Nextmart

Considering the 90-day investment horizon BlackRock is expected to generate 91.81 times less return on investment than Nextmart. But when comparing it to its historical volatility, BlackRock is 73.29 times less risky than Nextmart. It trades about 0.11 of its potential returns per unit of risk. Nextmart is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.09  in Nextmart on October 4, 2024 and sell it today you would lose (0.03) from holding Nextmart or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

BlackRock  vs.  Nextmart

BlackRock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 8 (%) 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.

Nextmart

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextmart are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Nextmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Nextmart

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

The idea behind BlackRock and Nextmart 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.