Correlation Between Blackrock Small/mid and Blackrock Total

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

By analyzing existing cross correlation between Blackrock Smallmid Cap and Blackrock Total Stock, you can compare the effects of market volatilities on Blackrock Small/mid and Blackrock Total 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 Small/mid with a short position of Blackrock Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Small/mid and Blackrock Total.

Diversification Opportunities for Blackrock Small/mid and Blackrock Total

0.97

Correlation Coefficient

Blackrock Small/mid  Blackrock Total

Almost no diversification

The 3 months correlation between Blackrock and Blackrock is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Smallmid Cap and Blackrock Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Total Stock and Blackrock Small/mid 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 Smallmid Cap are associated (or correlated) with Blackrock Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Total Stock has no effect on the direction of Blackrock Small/mid i.e., Blackrock Small/mid and Blackrock Total go up and down completely randomly.

Pair Corralation between Blackrock Small/mid and Blackrock Total

Assuming the 90 days horizon Blackrock Smallmid Cap is expected to generate 1.37 times more return on investment than Blackrock Total. However, Blackrock Small/mid is 1.37 times more volatile than Blackrock Total Stock. It trades about 0.2 of its potential returns per unit of risk. Blackrock Total Stock is currently generating about 0.21 per unit of risk. If you would invest  1,621  in Blackrock Smallmid Cap on September 2, 2024 and sell it today you would earn a total of  218.00  from holding Blackrock Smallmid Cap or generate 13.45% return on investment over 90 days.

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

Blackrock Smallmid Cap  vs.  Blackrock Total Stock

Blackrock Smallmid Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Smallmid Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Small/mid showed solid returns over the last few months and may actually be approaching a breakup point.

Blackrock Total Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Total Stock are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Blackrock Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blackrock Small/mid and Blackrock Total

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

The idea behind Blackrock Smallmid Cap and Blackrock Total Stock 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 Global Correlations module to find global opportunities by holding instruments from different markets.