Correlation Between Obayashi and BlackRock

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Can any of the company-specific risk be diversified away by investing in both Obayashi and BlackRock 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 Obayashi and BlackRock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Obayashi and BlackRock, you can compare the effects of market volatilities on Obayashi and BlackRock 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 Obayashi with a short position of BlackRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Obayashi and BlackRock.

Diversification Opportunities for Obayashi and BlackRock

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Obayashi and BlackRock is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Obayashi 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 Obayashi are associated (or correlated) with BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Obayashi i.e., Obayashi and BlackRock go up and down completely randomly.

Pair Corralation between Obayashi and BlackRock

Assuming the 90 days horizon Obayashi is expected to under-perform the BlackRock. In addition to that, Obayashi is 1.15 times more volatile than BlackRock. It trades about -0.22 of its total potential returns per unit of risk. BlackRock is currently generating about 0.13 per unit of volatility. If you would invest  101,508  in BlackRock on October 1, 2024 and sell it today you would earn a total of  2,910  from holding BlackRock or generate 2.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Obayashi  vs.  BlackRock

 Performance 
       Timeline  
Obayashi 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.
BlackRock 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Obayashi and BlackRock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Obayashi and BlackRock

The main advantage of trading using opposite Obayashi and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi position performs unexpectedly, BlackRock 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 will offset losses from the drop in BlackRock's long position.
The idea behind Obayashi and BlackRock 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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