Correlation Between Blackrock Small and Sp Midcap

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

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

Diversification Opportunities for Blackrock Small and Sp Midcap

0.85

Correlation Coefficient

Blackrock Small  Sp Midcap

Very poor diversification

The 3 months correlation between Blackrock and SPMIX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Small Cap and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and Blackrock Small 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 Small Cap are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of Blackrock Small i.e., Blackrock Small and Sp Midcap go up and down completely randomly.

Pair Corralation between Blackrock Small and Sp Midcap

Assuming the 90 days horizon Blackrock Small Cap is expected to under-perform the Sp Midcap. In addition to that, Blackrock Small is 1.23 times more volatile than Sp Midcap Index. It trades about -0.2 of its total potential returns per unit of risk. Sp Midcap Index is currently generating about -0.18 per unit of volatility. If you would invest  2,611  in Sp Midcap Index on December 3, 2024 and sell it today you would lose (83.00) from holding Sp Midcap Index or give up 3.18% of portfolio value over 90 days.

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

Blackrock Small Cap  vs.  Sp Midcap Index

Blackrock Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Small Cap 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 forward-looking signals 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.

Sp Midcap Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Blackrock Small and Sp Midcap

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

The idea behind Blackrock Small Cap and Sp Midcap Index 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.