Correlation Between GM and Blackrock Advantage

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

By analyzing existing cross correlation between General Motors and Blackrock Advantage Small, you can compare the effects of market volatilities on GM and Blackrock Advantage 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 GM with a short position of Blackrock Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Blackrock Advantage.

Diversification Opportunities for GM and Blackrock Advantage

0.77

Correlation Coefficient

GM  Blackrock Advantage

Poor diversification

The 3 months correlation between GM and Blackrock is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Blackrock Advantage Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Advantage Small and GM 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 General Motors are associated (or correlated) with Blackrock Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Advantage Small has no effect on the direction of GM i.e., GM and Blackrock Advantage go up and down completely randomly.

Pair Corralation between GM and Blackrock Advantage

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Blackrock Advantage. In addition to that, GM is 2.66 times more volatile than Blackrock Advantage Small. It trades about -0.16 of its total potential returns per unit of risk. Blackrock Advantage Small is currently generating about -0.02 per unit of volatility. If you would invest  1,980  in Blackrock Advantage Small on September 13, 2024 and sell it today you would lose (8.00) from holding Blackrock Advantage Small or give up 0.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

General Motors  vs.  Blackrock Advantage Small

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Blackrock Advantage Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Advantage Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Blackrock Advantage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GM and Blackrock Advantage

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

The idea behind General Motors and Blackrock Advantage Small 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.