Correlation Between BlackRock Equity and SPDR SSGA

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

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

Diversification Opportunities for BlackRock Equity and SPDR SSGA

1.0

Correlation Coefficient

BlackRock Equity  SPDR SSGA

No risk reduction

The 3 months correlation between BlackRock and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Equity Factor and SPDR SSGA Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Sector and BlackRock Equity 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 Equity Factor are associated (or correlated) with SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Sector has no effect on the direction of BlackRock Equity i.e., BlackRock Equity and SPDR SSGA go up and down completely randomly.

Pair Corralation between BlackRock Equity and SPDR SSGA

Given the investment horizon of 90 days BlackRock Equity Factor is expected to generate 0.97 times more return on investment than SPDR SSGA. However, BlackRock Equity Factor is 1.04 times less risky than SPDR SSGA. It trades about -0.08 of its potential returns per unit of risk. SPDR SSGA Sector is currently generating about -0.08 per unit of risk. If you would invest  5,131  in BlackRock Equity Factor on December 29, 2024 and sell it today you would lose (282.00) from holding BlackRock Equity Factor or give up 5.5% of portfolio value over 90 days.

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

BlackRock Equity Factor  vs.  SPDR SSGA Sector

BlackRock Equity Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Equity Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BlackRock Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SSGA Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SSGA Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SPDR SSGA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BlackRock Equity and SPDR SSGA

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

The idea behind BlackRock Equity Factor and SPDR SSGA Sector 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.