Correlation Between Blackrock All-cap and Energy Fund

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

By analyzing existing cross correlation between Blackrock All Cap Energy and Energy Fund Class, you can compare the effects of market volatilities on Blackrock All-cap and Energy Fund 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 Blackrock All-cap with a short position of Energy Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock All-cap and Energy Fund.

Diversification Opportunities for Blackrock All-cap and Energy Fund

0.9

Correlation Coefficient

Blackrock All-cap  Energy Fund

Almost no diversification

The 3 months correlation between Blackrock and Energy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock All Cap Energy and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fund Class and Blackrock All-cap 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 Blackrock All Cap Energy are associated (or correlated) with Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of Blackrock All-cap i.e., Blackrock All-cap and Energy Fund go up and down completely randomly.

Pair Corralation between Blackrock All-cap and Energy Fund

Assuming the 90 days horizon Blackrock All-cap is expected to generate 2.95 times less return on investment than Energy Fund. But when comparing it to its historical volatility, Blackrock All Cap Energy is 1.14 times less risky than Energy Fund. It trades about 0.02 of its potential returns per unit of risk. Energy Fund Class is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24,810  in Energy Fund Class on August 30, 2024 and sell it today you would earn a total of  673.00  from holding Energy Fund Class or generate 2.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Blackrock All Cap Energy  vs.  Energy Fund Class

Blackrock All Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock All Cap Energy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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.

Energy Fund Class

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Blackrock All-cap and Energy Fund

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

The idea behind Blackrock All Cap Energy and Energy Fund Class 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.