Correlation Between Blackrock Enhanced and BlackRock Credit

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

Diversification Opportunities for Blackrock Enhanced and BlackRock Credit

0.85

Correlation Coefficient

Blackrock Enhanced  BlackRock Credit

Very poor diversification

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

Pair Corralation between Blackrock Enhanced and BlackRock Credit

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 3.03 times less return on investment than BlackRock Credit. In addition to that, Blackrock Enhanced is 2.13 times more volatile than BlackRock Credit Allocation. It trades about 0.05 of its total potential returns per unit of risk. BlackRock Credit Allocation is currently generating about 0.3 per unit of volatility. If you would invest  1,060  in BlackRock Credit Allocation on November 29, 2024 and sell it today you would earn a total of  24.00  from holding BlackRock Credit Allocation or generate 2.26% return on investment over 90 days.

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

Blackrock Enhanced Equity  vs.  BlackRock Credit Allocation

Blackrock Enhanced Equity

Risk-Adjusted Performance

Weak

Over the last 90 days Blackrock Enhanced Equity has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively steady fundamental indicators, Blackrock Enhanced is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

BlackRock Credit All

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Credit Allocation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, BlackRock Credit 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 Enhanced and BlackRock Credit

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

The idea behind Blackrock Enhanced Equity and BlackRock Credit Allocation 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.