Correlation Between International Equity and Blackrock Health

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

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

Diversification Opportunities for International Equity and Blackrock Health

0.82

Correlation Coefficient

International Equity  Blackrock Health

Very poor diversification

The 3 months correlation between International and Blackrock is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Blackrock Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Health Sciences and International Equity 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 International Equity Index are associated (or correlated) with Blackrock Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Health Sciences has no effect on the direction of International Equity i.e., International Equity and Blackrock Health go up and down completely randomly.

Pair Corralation between International Equity and Blackrock Health

Assuming the 90 days horizon International Equity Index is expected to under-perform the Blackrock Health. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Equity Index is 1.42 times less risky than Blackrock Health. The mutual fund trades about -0.43 of its potential returns per unit of risk. The Blackrock Health Sciences is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  6,895  in Blackrock Health Sciences on October 6, 2024 and sell it today you would lose (575.00) from holding Blackrock Health Sciences or give up 8.34% of portfolio value over 90 days.

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

International Equity Index  vs.  Blackrock Health Sciences

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Health Sciences 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 International Equity and Blackrock Health

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

The idea behind International Equity Index and Blackrock Health Sciences 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.