Correlation Between Blackrock and Short-term Fund

Can any of the company-specific risk be diversified away by investing in both Blackrock and Short-term Fund 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 Short-term Fund 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 Short Term Fund R, you can compare the effects of market volatilities on Blackrock and Short-term Fund 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 Short-term Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock and Short-term Fund.

Diversification Opportunities for Blackrock and Short-term Fund

-0.64

Correlation Coefficient

Blackrock  Short-term Fund

Excellent diversification

The 3 months correlation between Blackrock and Short-term is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Sm Cap and Short Term Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Blackrock i.e., Blackrock and Short-term Fund go up and down completely randomly.

Pair Corralation between Blackrock and Short-term Fund

Assuming the 90 days horizon Blackrock Sm Cap is expected to under-perform the Short-term Fund. In addition to that, Blackrock is 13.48 times more volatile than Short Term Fund R. It trades about -0.11 of its total potential returns per unit of risk. Short Term Fund R is currently generating about 0.2 per unit of volatility. If you would invest  958.00  in Short Term Fund R on December 23, 2024 and sell it today you would earn a total of  10.00  from holding Short Term Fund R or generate 1.04% return on investment over 90 days.

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

Blackrock Sm Cap  vs.  Short Term Fund R

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.

Short Term Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund R are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short-term Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock and Short-term Fund

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

The idea behind Blackrock Sm Cap and Short Term Fund R 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.