Correlation Between Blackrock Enhanced and Smead Value

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

Diversification Opportunities for Blackrock Enhanced and Smead Value

0.92

Correlation Coefficient

Blackrock Enhanced  Smead Value

Almost no diversification

The 3 months correlation between Blackrock and Smead is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Capital and Smead Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead Value Fund 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 Smead Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead Value Fund has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Smead Value go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Smead Value

Considering the 90-day investment horizon Blackrock Enhanced Capital is expected to under-perform the Smead Value. But the fund apears to be less risky and, when comparing its historical volatility, Blackrock Enhanced Capital is 1.03 times less risky than Smead Value. The fund trades about -0.11 of its potential returns per unit of risk. The Smead Value Fund is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,862  in Smead Value Fund on December 29, 2024 and sell it today you would lose (272.00) from holding Smead Value Fund or give up 3.46% of portfolio value over 90 days.

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

Blackrock Enhanced Capital  vs.  Smead Value 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 latest weak performance, the Fund's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the fund traders.

Smead Value Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smead Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Smead Value 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 Smead Value

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

The idea behind Blackrock Enhanced Capital and Smead Value 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.