Correlation Between China Health and BlackRock Energy

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

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

Diversification Opportunities for China Health and BlackRock Energy

-0.26

Correlation Coefficient

China Health  BlackRock Energy

Very good diversification

The 3 months correlation between China and BlackRock is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Health Management and BlackRock Energy and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Energy and China Health 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 China Health Management are associated (or correlated) with BlackRock Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Energy has no effect on the direction of China Health i.e., China Health and BlackRock Energy go up and down completely randomly.

Pair Corralation between China Health and BlackRock Energy

Given the investment horizon of 90 days China Health is expected to generate 3.76 times less return on investment than BlackRock Energy. In addition to that, China Health is 14.01 times more volatile than BlackRock Energy and. It trades about 0.0 of its total potential returns per unit of risk. BlackRock Energy and is currently generating about 0.22 per unit of volatility. If you would invest  1,201  in BlackRock Energy and on February 19, 2024 and sell it today you would earn a total of  131.00  from holding BlackRock Energy and or generate 10.91% return on investment over 90 days.

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

China Health Management  vs.  BlackRock Energy and

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, China Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

BlackRock Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Energy and are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, BlackRock Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with China Health and BlackRock Energy

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

The idea behind China Health Management and BlackRock Energy and 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..