Correlation Between Blackrock Health and Small Capitalization

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

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

Diversification Opportunities for Blackrock Health and Small Capitalization

0.22

Correlation Coefficient

Blackrock Health  Small Capitalization

Modest diversification

The 3 months correlation between Blackrock and Small is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Health Sciences and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Blackrock Health 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 Health Sciences are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Blackrock Health i.e., Blackrock Health and Small Capitalization go up and down completely randomly.

Pair Corralation between Blackrock Health and Small Capitalization

Assuming the 90 days horizon Blackrock Health Sciences is expected to generate 0.62 times more return on investment than Small Capitalization. However, Blackrock Health Sciences is 1.61 times less risky than Small Capitalization. It trades about 0.07 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.14 per unit of risk. If you would invest  6,018  in Blackrock Health Sciences on December 30, 2024 and sell it today you would earn a total of  189.00  from holding Blackrock Health Sciences or generate 3.14% return on investment over 90 days.

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

Blackrock Health Sciences  vs.  Small Capitalization Portfolio

Blackrock Health Sciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Health Sciences are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blackrock Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Capitalization

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Capitalization Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Health and Small Capitalization

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

The idea behind Blackrock Health Sciences and Small Capitalization Portfolio 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.