Correlation Between Real Return and Blackrock Equity

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

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

Diversification Opportunities for Real Return and Blackrock Equity

0.7

Correlation Coefficient

Real Return  Blackrock Equity

Poor diversification

The 3 months correlation between REAL and Blackrock is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Real Return Fund and Blackrock Equity Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Equity Dividend and Real Return 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 Real Return Fund are associated (or correlated) with Blackrock Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Equity Dividend has no effect on the direction of Real Return i.e., Real Return and Blackrock Equity go up and down completely randomly.

Pair Corralation between Real Return and Blackrock Equity

Assuming the 90 days horizon Real Return is expected to generate 1.16 times less return on investment than Blackrock Equity. But when comparing it to its historical volatility, Real Return Fund is 2.44 times less risky than Blackrock Equity. It trades about 0.2 of its potential returns per unit of risk. Blackrock Equity Dividend is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,890  in Blackrock Equity Dividend on December 29, 2024 and sell it today you would earn a total of  79.00  from holding Blackrock Equity Dividend or generate 4.18% return on investment over 90 days.

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

Real Return Fund  vs.  Blackrock Equity Dividend

Real Return Fund

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Real Return Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Real Return is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Equity Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Equity Dividend are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blackrock Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Return and Blackrock Equity

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

The idea behind Real Return Fund and Blackrock Equity Dividend 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.