Correlation Between BlackRock and Austral Gold

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

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

Diversification Opportunities for BlackRock and Austral Gold

-0.52

Correlation Coefficient

BlackRock  Austral Gold

Excellent diversification

The 3 months correlation between BlackRock and Austral is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Austral Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austral Gold Limited 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 Austral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austral Gold Limited has no effect on the direction of BlackRock i.e., BlackRock and Austral Gold go up and down completely randomly.

Pair Corralation between BlackRock and Austral Gold

Considering the 90-day investment horizon BlackRock is expected to generate 34.61 times less return on investment than Austral Gold. But when comparing it to its historical volatility, BlackRock is 31.95 times less risky than Austral Gold. It trades about 0.14 of its potential returns per unit of risk. Austral Gold Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Austral Gold Limited on September 23, 2024 and sell it today you would earn a total of  0.82  from holding Austral Gold Limited or generate 54.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

BlackRock  vs.  Austral Gold Limited

BlackRock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Austral Gold Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Austral Gold

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

The idea behind BlackRock and Austral Gold Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.