Correlation Between Pacific Capital and Blackrock Smid

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

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

Diversification Opportunities for Pacific Capital and Blackrock Smid

0.16

Correlation Coefficient

Pacific Capital  Blackrock Smid

Average diversification

The 3 months correlation between Pacific and Blackrock is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Capital Tax Free and Blackrock Smid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Smid Cap and Pacific Capital 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 Pacific Capital Tax Free are associated (or correlated) with Blackrock Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Smid Cap has no effect on the direction of Pacific Capital i.e., Pacific Capital and Blackrock Smid go up and down completely randomly.

Pair Corralation between Pacific Capital and Blackrock Smid

Assuming the 90 days horizon Pacific Capital Tax Free is expected to generate 0.12 times more return on investment than Blackrock Smid. However, Pacific Capital Tax Free is 8.02 times less risky than Blackrock Smid. It trades about -0.27 of its potential returns per unit of risk. Blackrock Smid Cap Growth is currently generating about -0.18 per unit of risk. If you would invest  980.00  in Pacific Capital Tax Free on October 6, 2024 and sell it today you would lose (9.00) from holding Pacific Capital Tax Free or give up 0.92% of portfolio value over 90 days.

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

Pacific Capital Tax Free  vs.  Blackrock Smid Cap Growth

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pacific Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Smid Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Smid Cap Growth are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Smid may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pacific Capital and Blackrock Smid

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

The idea behind Pacific Capital Tax Free and Blackrock Smid Cap Growth 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.