Correlation Between Blackrock Midcap and Blackrock Smid-cap

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

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

Diversification Opportunities for Blackrock Midcap and Blackrock Smid-cap

0.99

Correlation Coefficient

Blackrock Midcap  Blackrock Smid-cap

No risk reduction

The 3 months correlation between Blackrock and Blackrock is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Midcap Index and Blackrock Smid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Smid Cap and Blackrock Midcap 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 Midcap Index are associated (or correlated) with Blackrock Smid-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 Smid Cap has no effect on the direction of Blackrock Midcap i.e., Blackrock Midcap and Blackrock Smid-cap go up and down completely randomly.

Pair Corralation between Blackrock Midcap and Blackrock Smid-cap

Assuming the 90 days horizon Blackrock Midcap is expected to generate 1.34 times less return on investment than Blackrock Smid-cap. But when comparing it to its historical volatility, Blackrock Midcap Index is 1.43 times less risky than Blackrock Smid-cap. It trades about 0.26 of its potential returns per unit of risk. Blackrock Smid Cap Growth is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,229  in Blackrock Smid Cap Growth on September 2, 2024 and sell it today you would earn a total of  209.00  from holding Blackrock Smid Cap Growth or generate 17.01% return on investment over 90 days.

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

Blackrock Midcap Index  vs.  Blackrock Smid Cap Growth

Blackrock Midcap Index

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Midcap Index are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Blackrock Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blackrock Smid Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Smid Cap Growth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Smid-cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackrock Midcap and Blackrock Smid-cap

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

The idea behind Blackrock Midcap Index and Blackrock Smid Cap Growth 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.