Correlation Between BlackRock and GP Investments

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

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

Diversification Opportunities for BlackRock and GP Investments

-0.44

Correlation Coefficient

BlackRock  GP Investments

Very good diversification

The 3 months correlation between BlackRock and GPIV33 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of BlackRock i.e., BlackRock and GP Investments go up and down completely randomly.

Pair Corralation between BlackRock and GP Investments

Assuming the 90 days trading horizon BlackRock is expected to generate 0.46 times more return on investment than GP Investments. However, BlackRock is 2.19 times less risky than GP Investments. It trades about 0.18 of its potential returns per unit of risk. GP Investments is currently generating about 0.04 per unit of risk. If you would invest  8,504  in BlackRock on September 23, 2024 and sell it today you would earn a total of  1,081  from holding BlackRock or generate 12.71% return on investment over 90 days.

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

BlackRock  vs.  GP Investments

BlackRock

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

GP Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, GP Investments 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 GP Investments

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

The idea behind BlackRock and GP Investments 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.