Correlation Between Bayerische Motoren and BlackRock

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

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

Diversification Opportunities for Bayerische Motoren and BlackRock

-0.73

Correlation Coefficient

Bayerische Motoren  BlackRock

Pay attention - limited upside

The 3 months correlation between Bayerische and BlackRock is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bayerische Motoren Werke and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Bayerische Motoren 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 Bayerische Motoren Werke are associated (or correlated) with BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Bayerische Motoren i.e., Bayerische Motoren and BlackRock go up and down completely randomly.

Pair Corralation between Bayerische Motoren and BlackRock

Assuming the 90 days trading horizon Bayerische Motoren is expected to generate 21.71 times less return on investment than BlackRock. But when comparing it to its historical volatility, Bayerische Motoren Werke is 1.15 times less risky than BlackRock. It trades about 0.0 of its potential returns per unit of risk. BlackRock is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,157,777  in BlackRock on December 5, 2024 and sell it today you would earn a total of  817,223  from holding BlackRock or generate 70.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Bayerische Motoren Werke  vs.  BlackRock

Bayerische Motoren Werke

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bayerische Motoren Werke are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bayerische Motoren is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bayerische Motoren and BlackRock

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

The idea behind Bayerische Motoren Werke and BlackRock 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.