Correlation Between BlackRock and Britvic PLC

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

By analyzing existing cross correlation between BlackRock and Britvic PLC ADR, you can compare the effects of market volatilities on BlackRock and Britvic PLC 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 Britvic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and Britvic PLC.

Diversification Opportunities for BlackRock and Britvic PLC

-0.09

Correlation Coefficient

BlackRock  Britvic PLC

Good diversification

The 3 months correlation between BlackRock and Britvic is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Britvic PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Britvic PLC ADR 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 Britvic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Britvic PLC ADR has no effect on the direction of BlackRock i.e., BlackRock and Britvic PLC go up and down completely randomly.

Pair Corralation between BlackRock and Britvic PLC

Considering the 90-day investment horizon BlackRock is expected to generate 1.14 times more return on investment than Britvic PLC. However, BlackRock is 1.14 times more volatile than Britvic PLC ADR. It trades about -0.1 of its potential returns per unit of risk. Britvic PLC ADR is currently generating about -0.12 per unit of risk. If you would invest  79,319  in BlackRock on January 20, 2024 and sell it today you would lose (4,589) from holding BlackRock or give up 5.79% of portfolio value over 90 days.

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

BlackRock  vs.  Britvic PLC ADR

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.

Britvic PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BlackRock and Britvic PLC

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

The idea behind BlackRock and Britvic PLC ADR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.