Correlation Between Financial Industries and Blackrock Moderate

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

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

Diversification Opportunities for Financial Industries and Blackrock Moderate

0.7

Correlation Coefficient

Financial Industries  Blackrock Moderate

Poor diversification

The 3 months correlation between Financial and Blackrock is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Blackrock Moderate Prepared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Moderate and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Blackrock Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Moderate has no effect on the direction of Financial Industries i.e., Financial Industries and Blackrock Moderate go up and down completely randomly.

Pair Corralation between Financial Industries and Blackrock Moderate

Assuming the 90 days horizon Financial Industries Fund is expected to under-perform the Blackrock Moderate. In addition to that, Financial Industries is 2.52 times more volatile than Blackrock Moderate Prepared. It trades about -0.01 of its total potential returns per unit of risk. Blackrock Moderate Prepared is currently generating about 0.01 per unit of volatility. If you would invest  1,267  in Blackrock Moderate Prepared on December 23, 2024 and sell it today you would earn a total of  4.00  from holding Blackrock Moderate Prepared or generate 0.32% return on investment over 90 days.

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

Financial Industries Fund  vs.  Blackrock Moderate Prepared

Financial Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Moderate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Moderate Prepared are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blackrock Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financial Industries and Blackrock Moderate

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

The idea behind Financial Industries Fund and Blackrock Moderate Prepared 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.