Correlation Between Bank Of and BlackRock

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

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

Diversification Opportunities for Bank Of and BlackRock

0.96

Correlation Coefficient

Bank Of  BlackRock

Almost no diversification

The 3 months correlation between Bank and BlackRock is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Bank Of 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 The Bank of 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 Bank Of i.e., Bank Of and BlackRock go up and down completely randomly.

Pair Corralation between Bank Of and BlackRock

Assuming the 90 days trading horizon Bank Of is expected to generate 1.63 times less return on investment than BlackRock. But when comparing it to its historical volatility, The Bank of is 1.2 times less risky than BlackRock. It trades about 0.16 of its potential returns per unit of risk. BlackRock is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  8,483  in BlackRock on September 26, 2024 and sell it today you would earn a total of  1,264  from holding BlackRock or generate 14.9% return on investment over 90 days.

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

The Bank of  vs.  BlackRock

The Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank Of sustained solid returns over the last few months and may actually be approaching a breakup point.

BlackRock

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Of and BlackRock

The main advantage of trading using opposite Bank Of and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Of 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 The Bank of 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.