Correlation Between BlackRock Utility and First Trust

Can any of the company-specific risk be diversified away by investing in both BlackRock Utility 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 Utility 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 Utility Infrastructure and First Trust Enhanced, you can compare the effects of market volatilities on BlackRock Utility 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 Utility with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Utility and First Trust.

Diversification Opportunities for BlackRock Utility and First Trust

0.23

Correlation Coefficient

BlackRock Utility  First Trust

Modest diversification

The 3 months correlation between BlackRock and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Utility Infrastructu 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 Utility 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 Utility Infrastructure 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 Utility i.e., BlackRock Utility and First Trust go up and down completely randomly.

Pair Corralation between BlackRock Utility and First Trust

Considering the 90-day investment horizon BlackRock Utility Infrastructure is expected to generate 0.94 times more return on investment than First Trust. However, BlackRock Utility Infrastructure is 1.07 times less risky than First Trust. It trades about 0.27 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.19 per unit of risk. If you would invest  2,312  in BlackRock Utility Infrastructure on September 15, 2024 and sell it today you would earn a total of  61.00  from holding BlackRock Utility Infrastructure or generate 2.64% return on investment over 90 days.

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

BlackRock Utility Infrastructu  vs.  First Trust Enhanced

BlackRock Utility

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Utility Infrastructure are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BlackRock Utility is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Enhanced are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. 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 Utility and First Trust

The main advantage of trading using opposite BlackRock Utility and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock Utility 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 Utility Infrastructure 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.