Correlation Between Energy Services and Blackrock Exchange

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

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

Diversification Opportunities for Energy Services and Blackrock Exchange

0.23

Correlation Coefficient

Energy Services  Blackrock Exchange

Modest diversification

The 3 months correlation between ENERGY and Blackrock is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Blackrock Exchange Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Exchange and Energy Services 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 Energy Services Fund are associated (or correlated) with Blackrock Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Exchange has no effect on the direction of Energy Services i.e., Energy Services and Blackrock Exchange go up and down completely randomly.

Pair Corralation between Energy Services and Blackrock Exchange

Assuming the 90 days horizon Energy Services Fund is expected to under-perform the Blackrock Exchange. In addition to that, Energy Services is 2.14 times more volatile than Blackrock Exchange Portfolio. It trades about -0.11 of its total potential returns per unit of risk. Blackrock Exchange Portfolio is currently generating about -0.01 per unit of volatility. If you would invest  236,018  in Blackrock Exchange Portfolio on December 4, 2024 and sell it today you would lose (1,126) from holding Blackrock Exchange Portfolio or give up 0.48% of portfolio value over 90 days.

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

Energy Services Fund  vs.  Blackrock Exchange Portfolio

Energy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Services Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Blackrock Exchange

Risk-Adjusted Performance

Weak

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

Pair Trading with Energy Services and Blackrock Exchange

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

The idea behind Energy Services Fund and Blackrock Exchange Portfolio 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.