Correlation Between Blackrock Large and Vanguard Small-cap

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

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

Diversification Opportunities for Blackrock Large and Vanguard Small-cap

0.44

Correlation Coefficient

Blackrock Large  Vanguard Small-cap

Very weak diversification

The 3 months correlation between Blackrock and Vanguard is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Large Cap and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Blackrock Large 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 Large Cap are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Blackrock Large i.e., Blackrock Large and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Blackrock Large and Vanguard Small-cap

Assuming the 90 days horizon Blackrock Large Cap is expected to generate 1.29 times more return on investment than Vanguard Small-cap. However, Blackrock Large is 1.29 times more volatile than Vanguard Small Cap Value. It trades about -0.08 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about -0.31 per unit of risk. If you would invest  905.00  in Blackrock Large Cap on October 10, 2024 and sell it today you would lose (20.00) from holding Blackrock Large Cap or give up 2.21% of portfolio value over 90 days.

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

Blackrock Large Cap  vs.  Vanguard Small Cap Value

Blackrock Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blackrock Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Small-cap 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 Large and Vanguard Small-cap

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

The idea behind Blackrock Large Cap and Vanguard Small Cap Value 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..