Correlation Between Inverse Emerging and Blackrock Equity

Can any of the company-specific risk be diversified away by investing in both Inverse Emerging 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 Inverse Emerging and Blackrock Equity 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 Equity Dividend, you can compare the effects of market volatilities on Inverse Emerging 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 Inverse Emerging with a short position of Blackrock Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Emerging and Blackrock Equity.

Diversification Opportunities for Inverse Emerging and Blackrock Equity

0.22

Correlation Coefficient

Inverse Emerging  Blackrock Equity

Modest diversification

The 3 months correlation between Inverse and Blackrock is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Emerging Markets 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 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 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 Inverse Emerging i.e., Inverse Emerging and Blackrock Equity go up and down completely randomly.

Pair Corralation between Inverse Emerging and Blackrock Equity

Assuming the 90 days horizon Inverse Emerging Markets is expected to generate 1.87 times more return on investment than Blackrock Equity. However, Inverse Emerging is 1.87 times more volatile than Blackrock Equity Dividend. It trades about 0.05 of its potential returns per unit of risk. Blackrock Equity Dividend is currently generating about -0.23 per unit of risk. If you would invest  833.00  in Inverse Emerging Markets on October 9, 2024 and sell it today you would earn a total of  29.00  from holding Inverse Emerging Markets or generate 3.48% return on investment over 90 days.

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

Inverse Emerging Markets  vs.  Blackrock Equity Dividend

Inverse Emerging Markets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Blackrock Equity Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Equity Dividend 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 Inverse Emerging and Blackrock Equity

The main advantage of trading using opposite Inverse Emerging and Blackrock Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Emerging 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 Inverse Emerging Markets 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.