Correlation Between Energy Fund and Blackrock All-cap

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

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

Diversification Opportunities for Energy Fund and Blackrock All-cap

0.68

Correlation Coefficient

Energy Fund  Blackrock All-cap

Poor diversification

The 3 months correlation between Energy and Blackrock is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Blackrock All Cap Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock All Cap and Energy Fund 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 Energy Fund Class are associated (or correlated) with Blackrock All-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock All Cap has no effect on the direction of Energy Fund i.e., Energy Fund and Blackrock All-cap go up and down completely randomly.

Pair Corralation between Energy Fund and Blackrock All-cap

Assuming the 90 days horizon Energy Fund is expected to generate 2.54 times less return on investment than Blackrock All-cap. In addition to that, Energy Fund is 1.19 times more volatile than Blackrock All Cap Energy. It trades about 0.04 of its total potential returns per unit of risk. Blackrock All Cap Energy is currently generating about 0.14 per unit of volatility. If you would invest  1,277  in Blackrock All Cap Energy on December 29, 2024 and sell it today you would earn a total of  116.00  from holding Blackrock All Cap Energy or generate 9.08% return on investment over 90 days.

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

Energy Fund Class  vs.  Blackrock All Cap Energy

Energy Fund Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Fund Class are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Energy Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock All Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock All Cap Energy are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock All-cap may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Energy Fund and Blackrock All-cap

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

The idea behind Energy Fund Class and Blackrock All Cap Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.