Correlation Between Inverse Emerging and Blackrock Small

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

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

Diversification Opportunities for Inverse Emerging and Blackrock Small

0.45

Correlation Coefficient

Inverse Emerging  Blackrock Small

Very weak diversification

The 3 months correlation between Inverse and Blackrock is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Emerging Markets and Blackrock Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Small Cap and Inverse Emerging 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 Inverse Emerging Markets are associated (or correlated) with Blackrock Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Small Cap has no effect on the direction of Inverse Emerging i.e., Inverse Emerging and Blackrock Small go up and down completely randomly.

Pair Corralation between Inverse Emerging and Blackrock Small

Assuming the 90 days horizon Inverse Emerging Markets is expected to under-perform the Blackrock Small. In addition to that, Inverse Emerging is 2.54 times more volatile than Blackrock Small Cap. It trades about -0.08 of its total potential returns per unit of risk. Blackrock Small Cap is currently generating about -0.11 per unit of volatility. If you would invest  2,455  in Blackrock Small Cap on December 22, 2024 and sell it today you would lose (190.00) from holding Blackrock Small Cap or give up 7.74% of portfolio value over 90 days.

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

Inverse Emerging Markets  vs.  Blackrock Small Cap

Inverse Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inverse Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Blackrock Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals 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 Inverse Emerging and Blackrock Small

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

The idea behind Inverse Emerging Markets and Blackrock Small Cap 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.