Correlation Between Sierra E and Blackrock Emerging

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

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

Diversification Opportunities for Sierra E and Blackrock Emerging

-0.25

Correlation Coefficient

Sierra E  Blackrock Emerging

Very good diversification

The 3 months correlation between Sierra and Blackrock is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Blackrock Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Emerging and Sierra E 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 Sierra E Retirement are associated (or correlated) with Blackrock Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Emerging has no effect on the direction of Sierra E i.e., Sierra E and Blackrock Emerging go up and down completely randomly.

Pair Corralation between Sierra E and Blackrock Emerging

Assuming the 90 days horizon Sierra E is expected to generate 1.04 times less return on investment than Blackrock Emerging. But when comparing it to its historical volatility, Sierra E Retirement is 2.88 times less risky than Blackrock Emerging. It trades about 0.19 of its potential returns per unit of risk. Blackrock Emerging Markets is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,414  in Blackrock Emerging Markets on September 17, 2024 and sell it today you would earn a total of  22.00  from holding Blackrock Emerging Markets or generate 0.91% return on investment over 90 days.

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

Sierra E Retirement  vs.  Blackrock Emerging Markets

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sierra E and Blackrock Emerging

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

The idea behind Sierra E Retirement and Blackrock Emerging Markets 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.