Correlation Between Blackrock Gbl and American Funds

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

By analyzing existing cross correlation between Blackrock Gbl Alloc and American Funds Balanced, you can compare the effects of market volatilities on Blackrock Gbl and American Funds 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 Gbl with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Gbl and American Funds.

Diversification Opportunities for Blackrock Gbl and American Funds

0.92

Correlation Coefficient

Blackrock Gbl  American Funds

Almost no diversification

The 3 months correlation between Blackrock and American is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Gbl Alloc and American Funds Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Balanced and Blackrock Gbl 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 Gbl Alloc are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Balanced has no effect on the direction of Blackrock Gbl i.e., Blackrock Gbl and American Funds go up and down completely randomly.

Pair Corralation between Blackrock Gbl and American Funds

Assuming the 90 days horizon Blackrock Gbl is expected to generate 1.33 times less return on investment than American Funds. In addition to that, Blackrock Gbl is 1.15 times more volatile than American Funds Balanced. It trades about 0.1 of its total potential returns per unit of risk. American Funds Balanced is currently generating about 0.15 per unit of volatility. If you would invest  1,480  in American Funds Balanced on September 19, 2024 and sell it today you would earn a total of  368.00  from holding American Funds Balanced or generate 24.86% return on investment over 90 days.

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

Blackrock Gbl Alloc  vs.  American Funds Balanced

Blackrock Gbl Alloc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Blackrock Gbl Alloc has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Gbl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Balanced

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days American Funds Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, American Funds 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 Gbl and American Funds

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

The idea behind Blackrock Gbl Alloc and American Funds Balanced 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.