Correlation Between Financial Industries and Blackrock

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

By analyzing existing cross correlation between Financial Industries Fund and Blackrock Sp 500, you can compare the effects of market volatilities on Financial Industries 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 Financial Industries with a short position of Blackrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Blackrock.

Diversification Opportunities for Financial Industries and Blackrock

0.38

Correlation Coefficient

Financial Industries  Blackrock

Weak diversification

The 3 months correlation between Financial and Blackrock is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Blackrock Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Sp 500 and Financial Industries 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 Financial Industries Fund 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 Sp 500 has no effect on the direction of Financial Industries i.e., Financial Industries and Blackrock go up and down completely randomly.

Pair Corralation between Financial Industries and Blackrock

Assuming the 90 days horizon Financial Industries is expected to generate 3.09 times less return on investment than Blackrock. In addition to that, Financial Industries is 1.99 times more volatile than Blackrock Sp 500. It trades about 0.02 of its total potential returns per unit of risk. Blackrock Sp 500 is currently generating about 0.1 per unit of volatility. If you would invest  67,851  in Blackrock Sp 500 on October 25, 2024 and sell it today you would earn a total of  3,395  from holding Blackrock Sp 500 or generate 5.0% return on investment over 90 days.

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

Financial Industries Fund  vs.  Blackrock Sp 500

Financial Industries

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Sp 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Sp 500 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, 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 Financial Industries and Blackrock

The main advantage of trading using opposite Financial Industries and Blackrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries 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 Financial Industries Fund and Blackrock Sp 500 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.