Correlation Between Investor and BlackRock
Can any of the company-specific risk be diversified away by investing in both Investor 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 Investor and BlackRock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investor AB ser and BlackRock, you can compare the effects of market volatilities on Investor 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 Investor with a short position of BlackRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and BlackRock.
Diversification Opportunities for Investor and BlackRock
Poor diversification
The 3 months correlation between Investor and BlackRock is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and Investor 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 Investor AB ser 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 Investor i.e., Investor and BlackRock go up and down completely randomly.
Pair Corralation between Investor and BlackRock
Assuming the 90 days horizon Investor AB ser is expected to under-perform the BlackRock. In addition to that, Investor is 1.04 times more volatile than BlackRock. It trades about -0.32 of its total potential returns per unit of risk. BlackRock is currently generating about -0.26 per unit of volatility. If you would invest 81,621 in BlackRock on January 24, 2024 and sell it today you would lose (5,610) from holding BlackRock or give up 6.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investor AB ser vs. BlackRock
Performance |
| Timeline |
| Investor AB ser |
| BlackRock |
Investor and BlackRock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investor and BlackRock
The main advantage of trading using opposite Investor and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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.| Investor vs. Tri Continental Closed | Investor vs. Adams Natural Resources | Investor vs. Adams Diversified Equity | Investor vs. Eaton Vance Tax |
| BlackRock vs. KKR Co LP | BlackRock vs. Apollo Global Management | BlackRock vs. Brookfield Asset Management | BlackRock vs. Carlyle Group |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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