Correlation Between NYSE Composite and Blackrock Moderate

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

By analyzing existing cross correlation between NYSE Composite and Blackrock Moderate Prepared, you can compare the effects of market volatilities on NYSE Composite and Blackrock Moderate 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 NYSE Composite with a short position of Blackrock Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Blackrock Moderate.

Diversification Opportunities for NYSE Composite and Blackrock Moderate

0.41

Correlation Coefficient

NYSE Composite  Blackrock Moderate

Very weak diversification

The 3 months correlation between NYSE and BlackRock is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Blackrock Moderate Prepared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Moderate and NYSE Composite 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 NYSE Composite are associated (or correlated) with Blackrock Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Moderate has no effect on the direction of NYSE Composite i.e., NYSE Composite and Blackrock Moderate go up and down completely randomly.

Pair Corralation between NYSE Composite and Blackrock Moderate

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.66 times more return on investment than Blackrock Moderate. However, NYSE Composite is 1.66 times more volatile than Blackrock Moderate Prepared. It trades about 0.18 of its potential returns per unit of risk. Blackrock Moderate Prepared is currently generating about 0.11 per unit of risk. If you would invest  1,887,802  in NYSE Composite on September 5, 2024 and sell it today you would earn a total of  130,779  from holding NYSE Composite or generate 6.93% return on investment over 90 days.

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

NYSE Composite  vs.  Blackrock Moderate Prepared

Pair Trading with NYSE Composite and Blackrock Moderate

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

The idea behind NYSE Composite and Blackrock Moderate Prepared 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.