Correlation Between Blackrock Enhanced and Royce Small

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

Diversification Opportunities for Blackrock Enhanced and Royce Small

0.59

Correlation Coefficient

Blackrock Enhanced  Royce Small

Very weak diversification

The 3 months correlation between Blackrock and Royce is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Equity and Royce Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Small Cap 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 Royce Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Small Cap has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Royce Small go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Royce Small

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 1.66 times less return on investment than Royce Small. But when comparing it to its historical volatility, Blackrock Enhanced Equity is 1.66 times less risky than Royce Small. It trades about 0.12 of its potential returns per unit of risk. Royce Small Cap Value is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,023  in Royce Small Cap Value on September 12, 2024 and sell it today you would earn a total of  101.00  from holding Royce Small Cap Value or generate 9.87% 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.  Royce Small Cap Value

Blackrock Enhanced Equity

Risk-Adjusted Performance

9 of 100

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 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.

Royce Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Small Cap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Royce Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blackrock Enhanced and Royce Small

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

The idea behind Blackrock Enhanced Equity and Royce Small Cap Value 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 CEOs Directory module to screen CEOs from public companies around the world.