Correlation Between BlackRock and NEW WORLD

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

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

Diversification Opportunities for BlackRock and NEW WORLD

-0.82

Correlation Coefficient

BlackRock  NEW WORLD

Pay attention - limited upside

The 3 months correlation between BlackRock and NEW is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and NEW WORLD DEVCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW WORLD DEVCO 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 NEW WORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW WORLD DEVCO has no effect on the direction of BlackRock i.e., BlackRock and NEW WORLD go up and down completely randomly.

Pair Corralation between BlackRock and NEW WORLD

Assuming the 90 days trading horizon BlackRock is expected to generate 0.18 times more return on investment than NEW WORLD. However, BlackRock is 5.53 times less risky than NEW WORLD. It trades about -0.37 of its potential returns per unit of risk. NEW WORLD DEVCO is currently generating about -0.3 per unit of risk. If you would invest  99,470  in BlackRock on September 23, 2024 and sell it today you would lose (1,970) from holding BlackRock or give up 1.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	36.36%
Values	Daily Returns

BlackRock  vs.  NEW WORLD DEVCO

BlackRock

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BlackRock reported solid returns over the last few months and may actually be approaching a breakup point.

NEW WORLD DEVCO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEW WORLD DEVCO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BlackRock and NEW WORLD

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

The idea behind BlackRock and NEW WORLD DEVCO 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.