Correlation Between Growth Strategy and Blackrock Basic

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

By analyzing existing cross correlation between Growth Strategy Fund and Blackrock Basic Value, you can compare the effects of market volatilities on Growth Strategy and Blackrock Basic 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 Growth Strategy with a short position of Blackrock Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Blackrock Basic.

Diversification Opportunities for Growth Strategy and Blackrock Basic

0.81

Correlation Coefficient

Growth Strategy  Blackrock Basic

Very poor diversification

The 3 months correlation between Growth and Blackrock is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Blackrock Basic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Basic Value and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Blackrock Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Basic Value has no effect on the direction of Growth Strategy i.e., Growth Strategy and Blackrock Basic go up and down completely randomly.

Pair Corralation between Growth Strategy and Blackrock Basic

Assuming the 90 days horizon Growth Strategy is expected to generate 2.16 times less return on investment than Blackrock Basic. But when comparing it to its historical volatility, Growth Strategy Fund is 1.0 times less risky than Blackrock Basic. It trades about 0.1 of its potential returns per unit of risk. Blackrock Basic Value is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,870  in Blackrock Basic Value on December 2, 2024 and sell it today you would earn a total of  105.00  from holding Blackrock Basic Value or generate 5.61% return on investment over 90 days.

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

Growth Strategy Fund  vs.  Blackrock Basic Value

Growth Strategy

Risk-Adjusted Performance

Very Weak

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

Blackrock Basic Value

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Growth Strategy and Blackrock Basic

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

The idea behind Growth Strategy Fund and Blackrock Basic Value 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.