Correlation Between BlackRock and Virtus Investment

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

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

Diversification Opportunities for BlackRock and Virtus Investment

0.89

Correlation Coefficient

BlackRock  Virtus Investment

Very poor diversification

The 3 months correlation between BlackRock and Virtus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Virtus Investment Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Investment and BlackRock 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 are associated (or correlated) with Virtus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Investment has no effect on the direction of BlackRock i.e., BlackRock and Virtus Investment go up and down completely randomly.

Pair Corralation between BlackRock and Virtus Investment

Assuming the 90 days trading horizon BlackRock is expected to generate 0.57 times more return on investment than Virtus Investment. However, BlackRock is 1.75 times less risky than Virtus Investment. It trades about 0.22 of its potential returns per unit of risk. Virtus Investment Partners is currently generating about 0.03 per unit of risk. If you would invest  72,771  in BlackRock on September 25, 2024 and sell it today you would earn a total of  24,729  from holding BlackRock or generate 33.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	89.06%
Values	Daily Returns

BlackRock  vs.  Virtus Investment Partners

BlackRock

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BlackRock reported solid returns over the last few months and may actually be approaching a breakup point.

Virtus Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtus Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Virtus Investment

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

The idea behind BlackRock and Virtus Investment Partners 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.