Correlation Between BlackRock Carbon and SPDR SP

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

By analyzing existing cross correlation between BlackRock Carbon Transition and SPDR SP 500, you can compare the effects of market volatilities on BlackRock Carbon and SPDR SP 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 BlackRock Carbon with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Carbon and SPDR SP.

Diversification Opportunities for BlackRock Carbon and SPDR SP

1.0

Correlation Coefficient

BlackRock Carbon  SPDR SP

No risk reduction

The 3 months correlation between BlackRock and SPDR is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Carbon Transition and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and BlackRock Carbon 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 BlackRock Carbon Transition are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of BlackRock Carbon i.e., BlackRock Carbon and SPDR SP go up and down completely randomly.

Pair Corralation between BlackRock Carbon and SPDR SP

Given the investment horizon of 90 days BlackRock Carbon is expected to generate 1.02 times less return on investment than SPDR SP. But when comparing it to its historical volatility, BlackRock Carbon Transition is 1.03 times less risky than SPDR SP. It trades about 0.19 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,577  in SPDR SP 500 on September 12, 2024 and sell it today you would earn a total of  402.00  from holding SPDR SP 500 or generate 8.78% return on investment over 90 days.

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

BlackRock Carbon Transition  vs.  SPDR SP 500

BlackRock Carbon Tra

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Carbon Transition are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BlackRock Carbon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BlackRock Carbon and SPDR SP

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

The idea behind BlackRock Carbon Transition and SPDR 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.