Correlation Between Blackrock Enhanced and The Midcap

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

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

Diversification Opportunities for Blackrock Enhanced and The Midcap

0.94

Correlation Coefficient

Blackrock Enhanced  The Midcap

Almost no diversification

The 3 months correlation between Blackrock and The is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Capital and The Midcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Blackrock Enhanced 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 Enhanced Capital are associated (or correlated) with The Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and The Midcap go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and The Midcap

Considering the 90-day investment horizon Blackrock Enhanced is expected to generate 1.21 times less return on investment than The Midcap. But when comparing it to its historical volatility, Blackrock Enhanced Capital is 1.1 times less risky than The Midcap. It trades about 0.06 of its potential returns per unit of risk. The Midcap Growth is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,134  in The Midcap Growth on August 31, 2024 and sell it today you would earn a total of  1,019  from holding The Midcap Growth or generate 24.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.73%
Values	Daily Returns

Blackrock Enhanced Capital  vs.  The Midcap Growth

Blackrock Enhanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Capital are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong forward indicators, Blackrock Enhanced is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Midcap Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Midcap Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, The Midcap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Blackrock Enhanced and The Midcap

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

The idea behind Blackrock Enhanced Capital and The Midcap 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.