Correlation Between Blackrock Mid and Plumb Balanced

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

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

Diversification Opportunities for Blackrock Mid and Plumb Balanced

0.92

Correlation Coefficient

Blackrock Mid  Plumb Balanced

Almost no diversification

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

Pair Corralation between Blackrock Mid and Plumb Balanced

Assuming the 90 days horizon Blackrock Mid Cap is expected to generate 1.68 times more return on investment than Plumb Balanced. However, Blackrock Mid is 1.68 times more volatile than Plumb Balanced. It trades about 0.09 of its potential returns per unit of risk. Plumb Balanced is currently generating about 0.13 per unit of risk. If you would invest  3,515  in Blackrock Mid Cap on September 14, 2024 and sell it today you would earn a total of  1,067  from holding Blackrock Mid Cap or generate 30.36% return on investment over 90 days.

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

Blackrock Mid Cap  vs.  Plumb Balanced

Blackrock Mid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Mid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Blackrock Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Plumb Balanced

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plumb Balanced are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Plumb Balanced 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 Mid and Plumb Balanced

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

The idea behind Blackrock Mid Cap and Plumb Balanced 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.