Correlation Between Bats Series and Blackrock Large

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

By analyzing existing cross correlation between Bats Series M and Blackrock Large Cap, you can compare the effects of market volatilities on Bats Series and Blackrock Large 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 Bats Series with a short position of Blackrock Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bats Series and Blackrock Large.

Diversification Opportunities for Bats Series and Blackrock Large

-0.73

Correlation Coefficient

Bats Series  Blackrock Large

Pay attention - limited upside

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

Pair Corralation between Bats Series and Blackrock Large

Assuming the 90 days horizon Bats Series is expected to generate 8.87 times less return on investment than Blackrock Large. But when comparing it to its historical volatility, Bats Series M is 2.61 times less risky than Blackrock Large. It trades about 0.03 of its potential returns per unit of risk. Blackrock Large Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  472.00  in Blackrock Large Cap on September 7, 2024 and sell it today you would earn a total of  434.00  from holding Blackrock Large Cap or generate 91.95% return on investment over 90 days.

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

Bats Series M  vs.  Blackrock Large Cap

Bats Series M

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bats Series M has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Bats Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Large Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Large Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bats Series and Blackrock Large

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

The idea behind Bats Series M and Blackrock Large Cap 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.