Correlation Between Blackrock International and Blackrock Midcap

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

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

Diversification Opportunities for Blackrock International and Blackrock Midcap

-0.64

Correlation Coefficient

Blackrock International  Blackrock Midcap

Excellent diversification

The 3 months correlation between Blackrock and BlackRock is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock International Index and Blackrock Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Midcap Index and Blackrock International 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 International Index are associated (or correlated) with Blackrock Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Midcap Index has no effect on the direction of Blackrock International i.e., Blackrock International and Blackrock Midcap go up and down completely randomly.

Pair Corralation between Blackrock International and Blackrock Midcap

Assuming the 90 days horizon Blackrock International Index is expected to under-perform the Blackrock Midcap. In addition to that, Blackrock International is 1.17 times more volatile than Blackrock Midcap Index. It trades about -0.05 of its total potential returns per unit of risk. Blackrock Midcap Index is currently generating about 0.26 per unit of volatility. If you would invest  1,492  in Blackrock Midcap Index on September 3, 2024 and sell it today you would earn a total of  187.00  from holding Blackrock Midcap Index or generate 12.53% return on investment over 90 days.

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

Blackrock International Index  vs.  Blackrock Midcap Index

Blackrock International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Midcap Index

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Midcap Index are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Blackrock Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blackrock International and Blackrock Midcap

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

The idea behind Blackrock International Index and Blackrock Midcap Index 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.