Correlation Between BlackRock Science and Main Sector

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

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

Diversification Opportunities for BlackRock Science and Main Sector

0.9

Correlation Coefficient

BlackRock Science  Main Sector

Almost no diversification

The 3 months correlation between BlackRock and Main is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Science Tech and Main Sector Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Sector Rotation and BlackRock Science 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 Science Tech are associated (or correlated) with Main Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Sector Rotation has no effect on the direction of BlackRock Science i.e., BlackRock Science and Main Sector go up and down completely randomly.

Pair Corralation between BlackRock Science and Main Sector

Considering the 90-day investment horizon BlackRock Science Tech is expected to generate 1.29 times more return on investment than Main Sector. However, BlackRock Science is 1.29 times more volatile than Main Sector Rotation. It trades about 0.08 of its potential returns per unit of risk. Main Sector Rotation is currently generating about 0.1 per unit of risk. If you would invest  2,399  in BlackRock Science Tech on September 15, 2024 and sell it today you would earn a total of  1,352  from holding BlackRock Science Tech or generate 56.36% return on investment over 90 days.

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

BlackRock Science Tech  vs.  Main Sector Rotation

BlackRock Science Tech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Science Tech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BlackRock Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Main Sector Rotation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Main Sector Rotation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Main Sector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BlackRock Science and Main Sector

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

The idea behind BlackRock Science Tech and Main Sector Rotation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.