Correlation Between Blackrock Midcap and Arbitrage Fund

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

By analyzing existing cross correlation between Blackrock Midcap Index and The Arbitrage Fund, you can compare the effects of market volatilities on Blackrock Midcap and Arbitrage Fund 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 Midcap with a short position of Arbitrage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Midcap and Arbitrage Fund.

Diversification Opportunities for Blackrock Midcap and Arbitrage Fund

0.36

Correlation Coefficient

Blackrock Midcap  Arbitrage Fund

Weak diversification

The 3 months correlation between Blackrock and Arbitrage is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Midcap Index and The Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrage Fund and Blackrock Midcap 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 Midcap Index are associated (or correlated) with Arbitrage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrage Fund has no effect on the direction of Blackrock Midcap i.e., Blackrock Midcap and Arbitrage Fund go up and down completely randomly.

Pair Corralation between Blackrock Midcap and Arbitrage Fund

Assuming the 90 days horizon Blackrock Midcap Index is expected to under-perform the Arbitrage Fund. In addition to that, Blackrock Midcap is 6.05 times more volatile than The Arbitrage Fund. It trades about -0.14 of its total potential returns per unit of risk. The Arbitrage Fund is currently generating about 0.04 per unit of volatility. If you would invest  1,294  in The Arbitrage Fund on September 15, 2024 and sell it today you would earn a total of  2.00  from holding The Arbitrage Fund or generate 0.15% return on investment over 90 days.

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

Blackrock Midcap Index  vs.  The Arbitrage Fund

Blackrock Midcap Index

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Midcap Index are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Blackrock Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arbitrage Fund

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Arbitrage Fund 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 Midcap and Arbitrage Fund

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

The idea behind Blackrock Midcap Index and The Arbitrage 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.