Correlation Between Blackrock Gbl and First Trust

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

By analyzing existing cross correlation between Blackrock Gbl Alloc and First Trust Short, you can compare the effects of market volatilities on Blackrock Gbl and First Trust 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 Gbl with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Gbl and First Trust.

Diversification Opportunities for Blackrock Gbl and First Trust

0.28

Correlation Coefficient

Blackrock Gbl  First Trust

Modest diversification

The 3 months correlation between Blackrock and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Gbl Alloc and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Blackrock Gbl 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 Gbl Alloc are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Blackrock Gbl i.e., Blackrock Gbl and First Trust go up and down completely randomly.

Pair Corralation between Blackrock Gbl and First Trust

Assuming the 90 days horizon Blackrock Gbl Alloc is expected to generate 5.24 times more return on investment than First Trust. However, Blackrock Gbl is 5.24 times more volatile than First Trust Short. It trades about -0.02 of its potential returns per unit of risk. First Trust Short is currently generating about -0.13 per unit of risk. If you would invest  1,894  in Blackrock Gbl Alloc on December 4, 2024 and sell it today you would lose (4.00) from holding Blackrock Gbl Alloc or give up 0.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Blackrock Gbl Alloc  vs.  First Trust Short

Blackrock Gbl Alloc

Risk-Adjusted Performance

Very Weak

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

First Trust Short

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Gbl and First Trust

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

The idea behind Blackrock Gbl Alloc and First Trust Short 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.

Check out your portfolio center.

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.