Correlation Between Global Technology and Blackrock Midcap

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

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

Diversification Opportunities for Global Technology and Blackrock Midcap

0.46

Correlation Coefficient

Global Technology  Blackrock Midcap

Very weak diversification

The 3 months correlation between Global and Blackrock is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio and Blackrock Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Midcap Index and Global Technology 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 Global Technology Portfolio are associated (or correlated) with Blackrock Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Midcap Index has no effect on the direction of Global Technology i.e., Global Technology and Blackrock Midcap go up and down completely randomly.

Pair Corralation between Global Technology and Blackrock Midcap

Assuming the 90 days horizon Global Technology Portfolio is expected to generate 1.02 times more return on investment than Blackrock Midcap. However, Global Technology is 1.02 times more volatile than Blackrock Midcap Index. It trades about 0.07 of its potential returns per unit of risk. Blackrock Midcap Index is currently generating about -0.04 per unit of risk. If you would invest  2,045  in Global Technology Portfolio on September 30, 2024 and sell it today you would earn a total of  103.00  from holding Global Technology Portfolio or generate 5.04% return on investment over 90 days.

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

Global Technology Portfolio  vs.  Blackrock Midcap Index

Global Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Technology Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Midcap Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Technology and Blackrock Midcap

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

The idea behind Global Technology Portfolio and Blackrock Midcap Index 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.