Correlation Between SP 500 and Blackrock 6040

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Can any of the company-specific risk be diversified away by investing in both SP 500 and Blackrock 6040 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 SP 500 and Blackrock 6040 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 SPDR and Blackrock 6040 Target, you can compare the effects of market volatilities on SP 500 and Blackrock 6040 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 SP 500 with a short position of Blackrock 6040. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Blackrock 6040.

Diversification Opportunities for SP 500 and Blackrock 6040

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between SP 500 and Blackrock is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 SPDR and Blackrock 6040 Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock 6040 Target and SP 500 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 SP 500 SPDR are associated (or correlated) with Blackrock 6040. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock 6040 Target has no effect on the direction of SP 500 i.e., SP 500 and Blackrock 6040 go up and down completely randomly.

Pair Corralation between SP 500 and Blackrock 6040

Considering the 90-day investment horizon SP 500 SPDR is expected to generate 1.46 times more return on investment than Blackrock 6040. However, SP 500 is 1.46 times more volatile than Blackrock 6040 Target. It trades about -0.02 of its potential returns per unit of risk. Blackrock 6040 Target is currently generating about -0.04 per unit of risk. If you would invest  40,503  in SP 500 SPDR on June 29, 2022 and sell it today you would lose (4,165)  from holding SP 500 SPDR or give up 10.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SP 500 SPDR  vs.  Blackrock 6040 Target

 Performance (%) 
       Timeline  
SP 500 SPDR 
SP 500 Performance
0 of 100
Over the last 90 days SP 500 SPDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SP 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SP 500 Price Channel

Blackrock 6040 Target 
Blackrock Performance
0 of 100
Over the last 90 days Blackrock 6040 Target has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock 6040 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Price Channel

SP 500 and Blackrock 6040 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SP 500 and Blackrock 6040

The main advantage of trading using opposite SP 500 and Blackrock 6040 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, Blackrock 6040 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 6040 will offset losses from the drop in Blackrock 6040's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against SP 500 as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. SP 500's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, SP 500's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to SP 500 SPDR.
The idea behind SP 500 SPDR and Blackrock 6040 Target 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.
Blackrock 6040 vs. Verizon Communications
Check out your portfolio center. 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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