Correlation Between Blackrock and Blackrock Value

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

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

Diversification Opportunities for Blackrock and Blackrock Value

0.99

Correlation Coefficient

Blackrock  Blackrock Value

No risk reduction

The 3 months correlation between Blackrock and Blackrock is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Sm Cap and Blackrock Value Opps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Value Opps and Blackrock 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 Sm Cap are associated (or correlated) with Blackrock Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Value Opps has no effect on the direction of Blackrock i.e., Blackrock and Blackrock Value go up and down completely randomly.

Pair Corralation between Blackrock and Blackrock Value

Assuming the 90 days horizon Blackrock Sm Cap is expected to under-perform the Blackrock Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Blackrock Sm Cap is 1.0 times less risky than Blackrock Value. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Blackrock Value Opps is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,761  in Blackrock Value Opps on December 23, 2024 and sell it today you would lose (193.00) from holding Blackrock Value Opps or give up 6.99% of portfolio value over 90 days.

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

Blackrock Sm Cap  vs.  Blackrock Value Opps

Blackrock Sm Cap

Risk-Adjusted Performance

Very Weak

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

Blackrock Value Opps

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Blackrock and Blackrock Value

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

The idea behind Blackrock Sm Cap and Blackrock Value Opps 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.