Correlation Between Cardinal Small and Blackrock Government

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

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

Diversification Opportunities for Cardinal Small and Blackrock Government

0.3

Correlation Coefficient

Cardinal Small  Blackrock Government

Weak diversification

The 3 months correlation between Cardinal and Blackrock is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Small Cap and Blackrock Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Government Bond and Cardinal Small 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 Cardinal Small Cap are associated (or correlated) with Blackrock Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Government Bond has no effect on the direction of Cardinal Small i.e., Cardinal Small and Blackrock Government go up and down completely randomly.

Pair Corralation between Cardinal Small and Blackrock Government

Assuming the 90 days horizon Cardinal Small Cap is expected to generate 0.03 times more return on investment than Blackrock Government. However, Cardinal Small Cap is 31.0 times less risky than Blackrock Government. It trades about 0.13 of its potential returns per unit of risk. Blackrock Government Bond is currently generating about -0.19 per unit of risk. If you would invest  1,443  in Cardinal Small Cap on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Cardinal Small Cap or generate 0.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.79%
Values	Daily Returns

Cardinal Small Cap  vs.  Blackrock Government Bond

Cardinal Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cardinal Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Government Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cardinal Small and Blackrock Government

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

The idea behind Cardinal Small Cap and Blackrock Government Bond 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.