Correlation Between Textron and BlackRock

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

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

Diversification Opportunities for Textron and BlackRock

-0.11

Correlation Coefficient

Textron  BlackRock

Good diversification

The 3 months correlation between Textron and BlackRock is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Textron and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Textron 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 Textron 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 Textron i.e., Textron and BlackRock go up and down completely randomly.

Pair Corralation between Textron and BlackRock

Assuming the 90 days trading horizon Textron is expected to under-perform the BlackRock. In addition to that, Textron is 1.09 times more volatile than BlackRock. It trades about -0.27 of its total potential returns per unit of risk. BlackRock is currently generating about -0.19 per unit of volatility. If you would invest  2,122,200  in BlackRock on October 13, 2024 and sell it today you would lose (83,521) from holding BlackRock or give up 3.94% of portfolio value over 90 days.

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

Textron  vs.  BlackRock

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

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

BlackRock

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BlackRock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Textron and BlackRock

The main advantage of trading using opposite Textron and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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 Textron 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.