Correlation Between Spindletop and BlackRock

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

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

Diversification Opportunities for Spindletop and BlackRock

-0.54

Correlation Coefficient

Spindletop  BlackRock

Excellent diversification

The 3 months correlation between Spindletop and BlackRock is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Spindletop OG and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Spindletop 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 Spindletop OG 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 Spindletop i.e., Spindletop and BlackRock go up and down completely randomly.

Pair Corralation between Spindletop and BlackRock

Given the investment horizon of 90 days Spindletop OG is expected to under-perform the BlackRock. In addition to that, Spindletop is 2.85 times more volatile than BlackRock. It trades about -0.29 of its total potential returns per unit of risk. BlackRock is currently generating about -0.31 per unit of volatility. If you would invest  106,526  in BlackRock on October 12, 2024 and sell it today you would lose (7,916) from holding BlackRock or give up 7.43% of portfolio value over 90 days.

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

Spindletop OG  vs.  BlackRock

Spindletop OG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spindletop OG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BlackRock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, BlackRock is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Spindletop and BlackRock

The main advantage of trading using opposite Spindletop and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spindletop 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 Spindletop OG 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.