Correlation Between Moderately Aggressive and Blackrock Developed

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

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

Diversification Opportunities for Moderately Aggressive and Blackrock Developed

0.24

Correlation Coefficient

Moderately Aggressive  Blackrock Developed

Modest diversification

The 3 months correlation between Moderately and Blackrock is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Blackrock Developed Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Developed Real and Moderately Aggressive 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 Moderately Aggressive Balanced are associated (or correlated) with Blackrock Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Developed Real has no effect on the direction of Moderately Aggressive i.e., Moderately Aggressive and Blackrock Developed go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Blackrock Developed

Assuming the 90 days horizon Moderately Aggressive Balanced is expected to generate 0.66 times more return on investment than Blackrock Developed. However, Moderately Aggressive Balanced is 1.52 times less risky than Blackrock Developed. It trades about -0.17 of its potential returns per unit of risk. Blackrock Developed Real is currently generating about -0.26 per unit of risk. If you would invest  1,214  in Moderately Aggressive Balanced on October 9, 2024 and sell it today you would lose (30.00) from holding Moderately Aggressive Balanced or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Moderately Aggressive Balanced  vs.  Blackrock Developed Real

Moderately Aggressive

Risk-Adjusted Performance

3 of 100

Insignificant

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

Blackrock Developed Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Developed Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Moderately Aggressive and Blackrock Developed

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

The idea behind Moderately Aggressive Balanced and Blackrock Developed Real 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.