Correlation Between North American and Blackrock International

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

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

Diversification Opportunities for North American and Blackrock International

-0.29

Correlation Coefficient

North American  Blackrock International

Very good diversification

The 3 months correlation between North and Blackrock is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Blackrock International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock International and North American 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 North American Financial are associated (or correlated) with Blackrock International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock International has no effect on the direction of North American i.e., North American and Blackrock International go up and down completely randomly.

Pair Corralation between North American and Blackrock International

Assuming the 90 days horizon North American Financial is expected to generate 2.81 times more return on investment than Blackrock International. However, North American is 2.81 times more volatile than Blackrock International Growth. It trades about 0.2 of its potential returns per unit of risk. Blackrock International Growth is currently generating about -0.01 per unit of risk. If you would invest  385.00  in North American Financial on September 3, 2024 and sell it today you would earn a total of  157.00  from holding North American Financial or generate 40.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

North American Financial  vs.  Blackrock International Growth

North American Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Blackrock International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with North American and Blackrock International

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

The idea behind North American Financial and Blackrock International Growth 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.