Correlation Between Small Cap and Blackrock Lifepath

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

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

Diversification Opportunities for Small Cap and Blackrock Lifepath

0.78

Correlation Coefficient

Small Cap  Blackrock Lifepath

Poor diversification

The 3 months correlation between Small and Blackrock is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Blackrock Lifepath Esg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Lifepath Esg and Small Cap 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 Small Cap Equity are associated (or correlated) with Blackrock Lifepath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Lifepath Esg has no effect on the direction of Small Cap i.e., Small Cap and Blackrock Lifepath go up and down completely randomly.

Pair Corralation between Small Cap and Blackrock Lifepath

Assuming the 90 days horizon Small Cap Equity is expected to generate 1.87 times more return on investment than Blackrock Lifepath. However, Small Cap is 1.87 times more volatile than Blackrock Lifepath Esg. It trades about 0.16 of its potential returns per unit of risk. Blackrock Lifepath Esg is currently generating about 0.13 per unit of risk. If you would invest  1,803  in Small Cap Equity on August 31, 2024 and sell it today you would earn a total of  228.00  from holding Small Cap Equity or generate 12.65% return on investment over 90 days.

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

Small Cap Equity  vs.  Blackrock Lifepath Esg

Small Cap Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Equity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Blackrock Lifepath Esg

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Lifepath Esg are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Blackrock Lifepath is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Blackrock Lifepath

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

The idea behind Small Cap Equity and Blackrock Lifepath Esg 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.