Correlation Between Vanguard Energy and Blackrock All-cap

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

Diversification Opportunities for Vanguard Energy and Blackrock All-cap

0.45

Correlation Coefficient

Vanguard Energy  Blackrock All-cap

Very weak diversification

The 3 months correlation between Vanguard and Blackrock is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Fund 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 Vanguard Energy 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 Vanguard Energy Fund 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 Vanguard Energy i.e., Vanguard Energy and Blackrock All-cap go up and down completely randomly.

Pair Corralation between Vanguard Energy and Blackrock All-cap

Assuming the 90 days horizon Vanguard Energy Fund is expected to under-perform the Blackrock All-cap. In addition to that, Vanguard Energy is 1.18 times more volatile than Blackrock All Cap Energy. It trades about -0.06 of its total potential returns per unit of risk. Blackrock All Cap Energy is currently generating about -0.03 per unit of volatility. If you would invest  1,356  in Blackrock All Cap Energy on October 9, 2024 and sell it today you would lose (83.00) from holding Blackrock All Cap Energy or give up 6.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Vanguard Energy Fund  vs.  Blackrock All Cap Energy

Vanguard Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Energy Fund 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Blackrock All Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Energy and Blackrock All-cap

The main advantage of trading using opposite Vanguard Energy and Blackrock All-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy 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 Vanguard Energy Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.