Correlation Between Small Cap and Blackrock Multi-asset

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

By analyzing existing cross correlation between Small Cap Value and Blackrock Multi Asset Income, you can compare the effects of market volatilities on Small Cap and Blackrock Multi-asset 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 Small Cap with a short position of Blackrock Multi-asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Blackrock Multi-asset.

Diversification Opportunities for Small Cap and Blackrock Multi-asset

0.83

Correlation Coefficient

Small Cap  Blackrock Multi-asset

Very poor diversification

The 3 months correlation between Small and Blackrock is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Blackrock Multi Asset Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Multi Asset and Small Cap 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 Small Cap Value are associated (or correlated) with Blackrock Multi-asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Multi Asset has no effect on the direction of Small Cap i.e., Small Cap and Blackrock Multi-asset go up and down completely randomly.

Pair Corralation between Small Cap and Blackrock Multi-asset

Assuming the 90 days horizon Small Cap is expected to generate 2.17 times less return on investment than Blackrock Multi-asset. In addition to that, Small Cap is 4.6 times more volatile than Blackrock Multi Asset Income. It trades about 0.0 of its total potential returns per unit of risk. Blackrock Multi Asset Income is currently generating about 0.04 per unit of volatility. If you would invest  1,014  in Blackrock Multi Asset Income on October 25, 2024 and sell it today you would earn a total of  8.00  from holding Blackrock Multi Asset Income or generate 0.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Small Cap Value  vs.  Blackrock Multi Asset Income

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Multi Asset

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Multi Asset Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Blackrock Multi-asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Blackrock Multi-asset

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

The idea behind Small Cap Value and Blackrock Multi Asset Income 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.

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 the Transaction History module to view history of all your transactions and understand their impact on performance.