Correlation Between Blackrock Defensive and Blackrock Eurofund

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

By analyzing existing cross correlation between Blackrock Defensive Advantage and Blackrock Eurofund Class, you can compare the effects of market volatilities on Blackrock Defensive and Blackrock Eurofund 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 Defensive with a short position of Blackrock Eurofund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Defensive and Blackrock Eurofund.

Diversification Opportunities for Blackrock Defensive and Blackrock Eurofund

0.87

Correlation Coefficient

Blackrock Defensive  Blackrock Eurofund

Very poor diversification

The 3 months correlation between Blackrock and Blackrock is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Defensive Advantage and Blackrock Eurofund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Eurofund Class and Blackrock Defensive 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 Defensive Advantage are associated (or correlated) with Blackrock Eurofund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Eurofund Class has no effect on the direction of Blackrock Defensive i.e., Blackrock Defensive and Blackrock Eurofund go up and down completely randomly.

Pair Corralation between Blackrock Defensive and Blackrock Eurofund

Assuming the 90 days horizon Blackrock Defensive Advantage is expected to generate 0.53 times more return on investment than Blackrock Eurofund. However, Blackrock Defensive Advantage is 1.89 times less risky than Blackrock Eurofund. It trades about -0.11 of its potential returns per unit of risk. Blackrock Eurofund Class is currently generating about -0.08 per unit of risk. If you would invest  1,055  in Blackrock Defensive Advantage on October 3, 2024 and sell it today you would lose (36.00) from holding Blackrock Defensive Advantage or give up 3.41% of portfolio value over 90 days.

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

Blackrock Defensive Advantage  vs.  Blackrock Eurofund Class

Blackrock Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Eurofund Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Eurofund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Blackrock Eurofund 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 Defensive and Blackrock Eurofund

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

The idea behind Blackrock Defensive Advantage and Blackrock Eurofund Class 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.