Correlation Between Blackrock Inflation and New World

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

Diversification Opportunities for Blackrock Inflation and New World

0.59

Correlation Coefficient

Blackrock Inflation  New World

Very weak diversification

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

Pair Corralation between Blackrock Inflation and New World

Assuming the 90 days horizon Blackrock Inflation is expected to generate 1.25 times less return on investment than New World. But when comparing it to its historical volatility, Blackrock Inflation Protected is 3.14 times less risky than New World. It trades about 0.17 of its potential returns per unit of risk. New World Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,666  in New World Fund on December 26, 2024 and sell it today you would earn a total of  246.00  from holding New World Fund or generate 3.21% return on investment over 90 days.

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

Blackrock Inflation Protected  vs.  New World Fund

Blackrock Inflation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Inflation Protected are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. 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.

New World Fund

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New World Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, New World 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 New World

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

The idea behind Blackrock Inflation Protected and New World Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.