Correlation Between IShares Focused and BlackRock Equity

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

By analyzing existing cross correlation between iShares Focused Value and BlackRock Equity Factor, you can compare the effects of market volatilities on IShares Focused and BlackRock Equity 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 IShares Focused with a short position of BlackRock Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Focused and BlackRock Equity.

Diversification Opportunities for IShares Focused and BlackRock Equity

0.67

Correlation Coefficient

IShares Focused  BlackRock Equity

Poor diversification

The 3 months correlation between IShares and BlackRock is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Focused Value and BlackRock Equity Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Equity Factor and IShares Focused 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 iShares Focused Value are associated (or correlated) with BlackRock Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Equity Factor has no effect on the direction of IShares Focused i.e., IShares Focused and BlackRock Equity go up and down completely randomly.

Pair Corralation between IShares Focused and BlackRock Equity

Given the investment horizon of 90 days iShares Focused Value is expected to under-perform the BlackRock Equity. But the etf apears to be less risky and, when comparing its historical volatility, iShares Focused Value is 1.05 times less risky than BlackRock Equity. The etf trades about -0.03 of its potential returns per unit of risk. The BlackRock Equity Factor is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  5,276  in BlackRock Equity Factor on December 1, 2024 and sell it today you would lose (63.00) from holding BlackRock Equity Factor or give up 1.19% of portfolio value over 90 days.

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

iShares Focused Value  vs.  BlackRock Equity Factor

iShares Focused Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Focused Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Focused is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BlackRock Equity Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Equity Factor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BlackRock Equity is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Focused and BlackRock Equity

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

The idea behind iShares Focused Value and BlackRock Equity Factor 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.