Correlation Between Blackrock Midcap and Blackrock Defensive

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

Diversification Opportunities for Blackrock Midcap and Blackrock Defensive

-0.32

Correlation Coefficient

Blackrock Midcap  Blackrock Defensive

Very good diversification

The 3 months correlation between Blackrock and Blackrock is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Midcap Index and Blackrock Defensive Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Defensive 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 Blackrock Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Defensive has no effect on the direction of Blackrock Midcap i.e., Blackrock Midcap and Blackrock Defensive go up and down completely randomly.

Pair Corralation between Blackrock Midcap and Blackrock Defensive

Assuming the 90 days horizon Blackrock Midcap Index is expected to under-perform the Blackrock Defensive. In addition to that, Blackrock Midcap is 3.23 times more volatile than Blackrock Defensive Advantage. It trades about -0.37 of its total potential returns per unit of risk. Blackrock Defensive Advantage is currently generating about 0.07 per unit of volatility. If you would invest  1,014  in Blackrock Defensive Advantage on September 29, 2024 and sell it today you would earn a total of  7.00  from holding Blackrock Defensive Advantage or generate 0.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Blackrock Midcap Index  vs.  Blackrock Defensive Advantage

Blackrock Midcap Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. 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.

Blackrock Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Defensive Advantage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Blackrock Defensive 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 Blackrock Defensive

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

The idea behind Blackrock Midcap Index and Blackrock Defensive Advantage 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.