Correlation Between Blackrock Inflation and Absolute Capital

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

By analyzing existing cross correlation between Blackrock Inflation Protected and Absolute Capital Defender, you can compare the effects of market volatilities on Blackrock Inflation and Absolute Capital 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 Inflation with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Inflation and Absolute Capital.

Diversification Opportunities for Blackrock Inflation and Absolute Capital

-0.48

Correlation Coefficient

Blackrock Inflation  Absolute Capital

Very good diversification

The 3 months correlation between Blackrock and Absolute is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Inflation Protected and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender and Blackrock Inflation 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 Inflation Protected are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Blackrock Inflation i.e., Blackrock Inflation and Absolute Capital go up and down completely randomly.

Pair Corralation between Blackrock Inflation and Absolute Capital

Assuming the 90 days horizon Blackrock Inflation Protected is expected to under-perform the Absolute Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Blackrock Inflation Protected is 2.0 times less risky than Absolute Capital. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Absolute Capital Defender is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Absolute Capital Defender on September 21, 2024 and sell it today you would earn a total of  30.00  from holding Absolute Capital Defender or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.07%
Values	Daily Returns

Blackrock Inflation Protected  vs.  Absolute Capital Defender

Blackrock Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Inflation Protected has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Blackrock Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Absolute Capital Defender

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Defender are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Capital 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 Inflation and Absolute Capital

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

The idea behind Blackrock Inflation Protected and Absolute Capital Defender 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.