Correlation Between Blackrock Enhanced and Westwood Quality

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

Diversification Opportunities for Blackrock Enhanced and Westwood Quality

-0.65

Correlation Coefficient

Blackrock Enhanced  Westwood Quality

Excellent diversification

The 3 months correlation between Blackrock and Westwood is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Capital and Westwood Quality Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Value 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 Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Value has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Westwood Quality go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Westwood Quality

Considering the 90-day investment horizon Blackrock Enhanced Capital is expected to generate 0.74 times more return on investment than Westwood Quality. However, Blackrock Enhanced Capital is 1.34 times less risky than Westwood Quality. It trades about 0.06 of its potential returns per unit of risk. Westwood Quality Value is currently generating about -0.14 per unit of risk. If you would invest  1,974  in Blackrock Enhanced Capital on December 1, 2024 and sell it today you would earn a total of  54.00  from holding Blackrock Enhanced Capital or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Blackrock Enhanced Capital  vs.  Westwood Quality Value

Blackrock Enhanced

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Capital are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Westwood Quality Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westwood Quality Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Blackrock Enhanced and Westwood Quality

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

The idea behind Blackrock Enhanced Capital and Westwood Quality Value 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.