Correlation Between Japan Smaller and Blackrock Enhanced

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

By analyzing existing cross correlation between Japan Smaller Capitalization and Blackrock Enhanced Government, you can compare the effects of market volatilities on Japan Smaller and Blackrock Enhanced 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 Japan Smaller with a short position of Blackrock Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Smaller and Blackrock Enhanced.

Diversification Opportunities for Japan Smaller and Blackrock Enhanced

0.25

Correlation Coefficient

Japan Smaller  Blackrock Enhanced

Modest diversification

The 3 months correlation between Japan and Blackrock is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Japan Smaller Capitalization and Blackrock Enhanced Government in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Enhanced and Japan Smaller 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 Japan Smaller Capitalization are associated (or correlated) with Blackrock Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Enhanced has no effect on the direction of Japan Smaller i.e., Japan Smaller and Blackrock Enhanced go up and down completely randomly.

Pair Corralation between Japan Smaller and Blackrock Enhanced

Considering the 90-day investment horizon Japan Smaller Capitalization is expected to under-perform the Blackrock Enhanced. But the fund apears to be less risky and, when comparing its historical volatility, Japan Smaller Capitalization is 2.15 times less risky than Blackrock Enhanced. The fund trades about -0.01 of its potential returns per unit of risk. The Blackrock Enhanced Government is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Blackrock Enhanced Government on October 20, 2024 and sell it today you would earn a total of  4.00  from holding Blackrock Enhanced Government or generate 0.42% return on investment over 90 days.

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

Japan Smaller Capitalization  vs.  Blackrock Enhanced Government

Japan Smaller Capita

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Smaller Capitalization are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Japan Smaller is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Blackrock Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Enhanced Government has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, Blackrock Enhanced is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Japan Smaller and Blackrock Enhanced

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

The idea behind Japan Smaller Capitalization and Blackrock Enhanced Government 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.