Correlation Between Blackrock Midcap and Diamond Hill

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

Diversification Opportunities for Blackrock Midcap and Diamond Hill

-0.08

Correlation Coefficient

Blackrock Midcap  Diamond Hill

Good diversification

The 3 months correlation between Blackrock and Diamond is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Midcap Index and Diamond Hill Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Long 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Long has no effect on the direction of Blackrock Midcap i.e., Blackrock Midcap and Diamond Hill go up and down completely randomly.

Pair Corralation between Blackrock Midcap and Diamond Hill

Assuming the 90 days horizon Blackrock Midcap Index is expected to generate 1.06 times more return on investment than Diamond Hill. However, Blackrock Midcap is 1.06 times more volatile than Diamond Hill Long Short. It trades about 0.04 of its potential returns per unit of risk. Diamond Hill Long Short is currently generating about -0.1 per unit of risk. If you would invest  1,516  in Blackrock Midcap Index on September 15, 2024 and sell it today you would earn a total of  32.00  from holding Blackrock Midcap Index or generate 2.11% return on investment over 90 days.

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

Blackrock Midcap Index  vs.  Diamond Hill Long Short

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.

Diamond Hill Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Diamond Hill 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 Diamond Hill

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

The idea behind Blackrock Midcap Index and Diamond Hill Long Short 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.