Correlation Between Small Cap and Blackrock Science

Can any of the company-specific risk be diversified away by investing in both Small Cap and Blackrock Science 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 Science 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 Science Technology, you can compare the effects of market volatilities on Small Cap and Blackrock Science 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 Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Blackrock Science.

Diversification Opportunities for Small Cap and Blackrock Science

0.88

Correlation Coefficient

Small Cap  Blackrock Science

Very poor diversification

The 3 months correlation between Small and BLACKROCK is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Blackrock Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Science 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 Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Science has no effect on the direction of Small Cap i.e., Small Cap and Blackrock Science go up and down completely randomly.

Pair Corralation between Small Cap and Blackrock Science

Assuming the 90 days horizon Small Cap Value is expected to generate 0.54 times more return on investment than Blackrock Science. However, Small Cap Value is 1.84 times less risky than Blackrock Science. It trades about -0.06 of its potential returns per unit of risk. Blackrock Science Technology is currently generating about -0.11 per unit of risk. If you would invest  1,052  in Small Cap Value on December 29, 2024 and sell it today you would lose (45.00) from holding Small Cap Value or give up 4.28% of portfolio value over 90 days.

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

Small Cap Value  vs.  Blackrock Science Technology

Small Cap Value

Risk-Adjusted Performance

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 basic 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 Science

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Science Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Small Cap and Blackrock Science

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

The idea behind Small Cap Value and Blackrock Science Technology 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.