Correlation Between Destinations Global and Blackrock

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

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

Diversification Opportunities for Destinations Global and Blackrock

0.61

Correlation Coefficient

Destinations Global  Blackrock

Poor diversification

The 3 months correlation between Destinations and Blackrock is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Destinations Global Fixed and Blackrock Sm Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Sm Cap and Destinations Global 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 Destinations Global Fixed 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 Sm Cap has no effect on the direction of Destinations Global i.e., Destinations Global and Blackrock go up and down completely randomly.

Pair Corralation between Destinations Global and Blackrock

Assuming the 90 days horizon Destinations Global is expected to generate 1.26 times less return on investment than Blackrock. But when comparing it to its historical volatility, Destinations Global Fixed is 9.6 times less risky than Blackrock. It trades about 0.2 of its potential returns per unit of risk. Blackrock Sm Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,109  in Blackrock Sm Cap on October 13, 2024 and sell it today you would earn a total of  289.00  from holding Blackrock Sm Cap or generate 13.7% return on investment over 90 days.

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

Destinations Global Fixed  vs.  Blackrock Sm Cap

Destinations Global Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Sm Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Sm Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Blackrock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Destinations Global and Blackrock

The main advantage of trading using opposite Destinations Global and Blackrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destinations Global 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 Destinations Global Fixed and Blackrock Sm 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.