Correlation Between DMY Squared and BlackRock

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

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

Diversification Opportunities for DMY Squared and BlackRock

-0.36

Correlation Coefficient

DMY Squared  BlackRock

Very good diversification

The 3 months correlation between DMY and BlackRock is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding dMY Squared Technology and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock and DMY Squared 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 dMY Squared Technology 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 DMY Squared i.e., DMY Squared and BlackRock go up and down completely randomly.

Pair Corralation between DMY Squared and BlackRock

Given the investment horizon of 90 days DMY Squared is expected to generate 4.11 times less return on investment than BlackRock. But when comparing it to its historical volatility, dMY Squared Technology is 5.1 times less risky than BlackRock. It trades about 0.06 of its potential returns per unit of risk. BlackRock is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  56,077  in BlackRock on February 8, 2024 and sell it today you would earn a total of  22,015  from holding BlackRock or generate 39.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.92%
Values	Daily Returns

dMY Squared Technology  vs.  BlackRock

dMY Squared Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days dMY Squared Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, DMY Squared is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BlackRock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, BlackRock is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with DMY Squared and BlackRock

The main advantage of trading using opposite DMY Squared and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DMY Squared 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 dMY Squared Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.