Correlation Between Xtrackers and BlackRock Carbon

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

By analyzing existing cross correlation between Xtrackers SP 500 and BlackRock Carbon Transition, you can compare the effects of market volatilities on Xtrackers and BlackRock Carbon 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 Xtrackers with a short position of BlackRock Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and BlackRock Carbon.

Diversification Opportunities for Xtrackers and BlackRock Carbon

1.0

Correlation Coefficient

Xtrackers  BlackRock Carbon

No risk reduction

The 3 months correlation between Xtrackers and BlackRock is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 and BlackRock Carbon Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Carbon Tra and Xtrackers 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 Xtrackers SP 500 are associated (or correlated) with BlackRock Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Carbon Tra has no effect on the direction of Xtrackers i.e., Xtrackers and BlackRock Carbon go up and down completely randomly.

Pair Corralation between Xtrackers and BlackRock Carbon

Given the investment horizon of 90 days Xtrackers is expected to generate 1.04 times less return on investment than BlackRock Carbon. But when comparing it to its historical volatility, Xtrackers SP 500 is 1.01 times less risky than BlackRock Carbon. It trades about 0.21 of its potential returns per unit of risk. BlackRock Carbon Transition is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,982  in BlackRock Carbon Transition on September 5, 2024 and sell it today you would earn a total of  624.00  from holding BlackRock Carbon Transition or generate 10.43% return on investment over 90 days.

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

Xtrackers SP 500  vs.  BlackRock Carbon Transition

Xtrackers SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Xtrackers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BlackRock Carbon Tra

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Carbon Transition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, BlackRock Carbon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and BlackRock Carbon

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

The idea behind Xtrackers SP 500 and BlackRock Carbon Transition 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.