Correlation Between BlackRock Health and First Trust

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

By analyzing existing cross correlation between BlackRock Health Sciences and First Trust Enhanced, you can compare the effects of market volatilities on BlackRock Health and First Trust 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 Health with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Health and First Trust.

Diversification Opportunities for BlackRock Health and First Trust

0.52

Correlation Coefficient

BlackRock Health  First Trust

Very weak diversification

The 3 months correlation between BlackRock and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Health Sciences and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and BlackRock Health 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 Health Sciences are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Enhanced has no effect on the direction of BlackRock Health i.e., BlackRock Health and First Trust go up and down completely randomly.

Pair Corralation between BlackRock Health and First Trust

Given the investment horizon of 90 days BlackRock Health Sciences is expected to generate 1.72 times more return on investment than First Trust. However, BlackRock Health is 1.72 times more volatile than First Trust Enhanced. It trades about 0.04 of its potential returns per unit of risk. First Trust Enhanced is currently generating about -0.07 per unit of risk. If you would invest  1,504  in BlackRock Health Sciences on December 4, 2024 and sell it today you would earn a total of  41.00  from holding BlackRock Health Sciences or generate 2.73% return on investment over 90 days.

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

BlackRock Health Sciences  vs.  First Trust Enhanced

BlackRock Health Sciences

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Health Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, BlackRock Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

First Trust Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BlackRock Health and First Trust

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

The idea behind BlackRock Health Sciences and First Trust Enhanced 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .