Correlation Between Blackrock Small and Blackrock High

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

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

Diversification Opportunities for Blackrock Small and Blackrock High

0.4

Correlation Coefficient

Blackrock Small  Blackrock High

Very weak diversification

The 3 months correlation between Blackrock and Blackrock is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Small Cap and Blackrock High Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock High Equity and Blackrock Small 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 Small Cap are associated (or correlated) with Blackrock High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock High Equity has no effect on the direction of Blackrock Small i.e., Blackrock Small and Blackrock High go up and down completely randomly.

Pair Corralation between Blackrock Small and Blackrock High

Assuming the 90 days horizon Blackrock Small Cap is expected to under-perform the Blackrock High. In addition to that, Blackrock Small is 2.1 times more volatile than Blackrock High Equity. It trades about -0.14 of its total potential returns per unit of risk. Blackrock High Equity is currently generating about -0.03 per unit of volatility. If you would invest  2,435  in Blackrock High Equity on December 3, 2024 and sell it today you would lose (26.00) from holding Blackrock High Equity or give up 1.07% of portfolio value over 90 days.

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

Blackrock Small Cap  vs.  Blackrock High Equity

Blackrock Small Cap

Risk-Adjusted Performance

Very Weak

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

Blackrock High Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock High Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock High 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 Small and Blackrock High

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

The idea behind Blackrock Small Cap and Blackrock High Equity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.