Correlation Between FEC Resources and BlackRock

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

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

Diversification Opportunities for FEC Resources and BlackRock

-0.62

Correlation Coefficient

FEC Resources  BlackRock

Excellent diversification

The 3 months correlation between FEC and BlackRock is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding FEC Resources and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and FEC Resources 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 FEC Resources 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 FEC Resources i.e., FEC Resources and BlackRock go up and down completely randomly.

Pair Corralation between FEC Resources and BlackRock

Assuming the 90 days horizon FEC Resources is expected to generate 20.23 times more return on investment than BlackRock. However, FEC Resources is 20.23 times more volatile than BlackRock. It trades about 0.1 of its potential returns per unit of risk. BlackRock is currently generating about 0.17 per unit of risk. If you would invest  0.17  in FEC Resources on September 24, 2024 and sell it today you would earn a total of  0.10  from holding FEC Resources or generate 58.82% return on investment over 90 days.

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

FEC Resources  vs.  BlackRock

FEC Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FEC Resources reported solid returns over the last few months and may actually be approaching a breakup point.

BlackRock

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FEC Resources and BlackRock

The main advantage of trading using opposite FEC Resources and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEC Resources 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 FEC Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..