Correlation Between BlackRock and 512807AN8

Can any of the company-specific risk be diversified away by investing in both BlackRock and 512807AN8 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 512807AN8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BlackRock and LAM RESH P, you can compare the effects of market volatilities on BlackRock and 512807AN8 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 512807AN8. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and 512807AN8.

Diversification Opportunities for BlackRock and 512807AN8

-0.15

Correlation Coefficient

BlackRock  512807AN8

Good diversification

The 3 months correlation between BlackRock and 512807AN8 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and LAM RESH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAM RESH P 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 512807AN8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAM RESH P has no effect on the direction of BlackRock i.e., BlackRock and 512807AN8 go up and down completely randomly.

Pair Corralation between BlackRock and 512807AN8

Considering the 90-day investment horizon BlackRock is expected to under-perform the 512807AN8. In addition to that, BlackRock is 9.14 times more volatile than LAM RESH P. It trades about -0.06 of its total potential returns per unit of risk. LAM RESH P is currently generating about -0.01 per unit of volatility. If you would invest  9,980  in LAM RESH P on October 4, 2024 and sell it today you would lose (2.00) from holding LAM RESH P or give up 0.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

BlackRock  vs.  LAM RESH P

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.

LAM RESH P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAM RESH P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 512807AN8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BlackRock and 512807AN8

The main advantage of trading using opposite BlackRock and 512807AN8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock position performs unexpectedly, 512807AN8 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 512807AN8 will offset losses from the drop in 512807AN8's long position.

The idea behind BlackRock and LAM RESH P 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.