Correlation Between Blackrock Exchange and First American

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

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

Diversification Opportunities for Blackrock Exchange and First American

0.1

Correlation Coefficient

Blackrock Exchange  First American

Average diversification

The 3 months correlation between Blackrock and First is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Exchange Portfolio and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds and Blackrock Exchange 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 Blackrock Exchange Portfolio are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Blackrock Exchange i.e., Blackrock Exchange and First American go up and down completely randomly.

Pair Corralation between Blackrock Exchange and First American

Assuming the 90 days horizon Blackrock Exchange Portfolio is expected to generate 5.67 times more return on investment than First American. However, Blackrock Exchange is 5.67 times more volatile than First American Funds. It trades about 0.06 of its potential returns per unit of risk. First American Funds is currently generating about 0.13 per unit of risk. If you would invest  232,423  in Blackrock Exchange Portfolio on September 3, 2024 and sell it today you would earn a total of  6,265  from holding Blackrock Exchange Portfolio or generate 2.7% return on investment over 90 days.

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

Blackrock Exchange Portfolio  vs.  First American Funds

Blackrock Exchange

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Exchange Portfolio are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

First American Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First American Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Exchange and First American

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

The idea behind Blackrock Exchange Portfolio and First American Funds 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.