Correlation Between Gmo High and Blackrock Balanced

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

By analyzing existing cross correlation between Gmo High Yield and Blackrock Balanced Capital, you can compare the effects of market volatilities on Gmo High and Blackrock Balanced 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 Gmo High with a short position of Blackrock Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Blackrock Balanced.

Diversification Opportunities for Gmo High and Blackrock Balanced

0.58

Correlation Coefficient

Gmo High  Blackrock Balanced

Very weak diversification

The 3 months correlation between Gmo and Blackrock is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Blackrock Balanced Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Balanced and Gmo High 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 Gmo High Yield are associated (or correlated) with Blackrock Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Balanced has no effect on the direction of Gmo High i.e., Gmo High and Blackrock Balanced go up and down completely randomly.

Pair Corralation between Gmo High and Blackrock Balanced

Assuming the 90 days horizon Gmo High Yield is expected to under-perform the Blackrock Balanced. In addition to that, Gmo High is 3.34 times more volatile than Blackrock Balanced Capital. It trades about -0.22 of its total potential returns per unit of risk. Blackrock Balanced Capital is currently generating about -0.1 per unit of volatility. If you would invest  2,745  in Blackrock Balanced Capital on September 22, 2024 and sell it today you would lose (31.00) from holding Blackrock Balanced Capital or give up 1.13% of portfolio value over 90 days.

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

Gmo High Yield  vs.  Blackrock Balanced Capital

Gmo High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Blackrock Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gmo High and Blackrock Balanced

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

The idea behind Gmo High Yield and Blackrock Balanced Capital 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.