Correlation Between Blackrock Enhanced and Longleaf Partners

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

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

Diversification Opportunities for Blackrock Enhanced and Longleaf Partners

0.78

Correlation Coefficient

Blackrock Enhanced  Longleaf Partners

Poor diversification

The 3 months correlation between Blackrock and Longleaf is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Capital and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners and Blackrock Enhanced 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 Enhanced Capital are associated (or correlated) with Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Longleaf Partners go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Longleaf Partners

Considering the 90-day investment horizon Blackrock Enhanced Capital is expected to under-perform the Longleaf Partners. In addition to that, Blackrock Enhanced is 1.2 times more volatile than Longleaf Partners Fund. It trades about -0.11 of its total potential returns per unit of risk. Longleaf Partners Fund is currently generating about -0.1 per unit of volatility. If you would invest  2,425  in Longleaf Partners Fund on December 30, 2024 and sell it today you would lose (115.00) from holding Longleaf Partners Fund or give up 4.74% of portfolio value over 90 days.

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

Blackrock Enhanced Capital  vs.  Longleaf Partners Fund

Blackrock Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Enhanced Capital has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong forward indicators, Blackrock Enhanced is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Longleaf Partners

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Blackrock Enhanced Capital and Longleaf Partners 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.