Correlation Between Blackrock Enhanced and Avantis International

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

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

Diversification Opportunities for Blackrock Enhanced and Avantis International

0.55

Correlation Coefficient

Blackrock Enhanced  Avantis International

Very weak diversification

The 3 months correlation between Blackrock and Avantis is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Equity and Avantis International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis International and Blackrock Enhanced 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 Enhanced Equity are associated (or correlated) with Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Avantis International go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Avantis International

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 1.49 times less return on investment than Avantis International. But when comparing it to its historical volatility, Blackrock Enhanced Equity is 1.09 times less risky than Avantis International. It trades about 0.13 of its potential returns per unit of risk. Avantis International Small is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,222  in Avantis International Small on December 30, 2024 and sell it today you would earn a total of  117.00  from holding Avantis International Small or generate 9.57% return on investment over 90 days.

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

Blackrock Enhanced Equity  vs.  Avantis International Small

Blackrock Enhanced Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively weak fundamental indicators, Blackrock Enhanced may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Avantis International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis International Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Avantis International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Blackrock Enhanced and Avantis International

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

The idea behind Blackrock Enhanced Equity and Avantis International Small 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.