Correlation Between Blackrock Gbl and Vanguard Small

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

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

Diversification Opportunities for Blackrock Gbl and Vanguard Small

0.59

Correlation Coefficient

Blackrock Gbl  Vanguard Small

Very weak diversification

The 3 months correlation between Blackrock and Vanguard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Gbl Alloc and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and Blackrock Gbl 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 Gbl Alloc are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of Blackrock Gbl i.e., Blackrock Gbl and Vanguard Small go up and down completely randomly.

Pair Corralation between Blackrock Gbl and Vanguard Small

Assuming the 90 days horizon Blackrock Gbl is expected to generate 1.9 times less return on investment than Vanguard Small. But when comparing it to its historical volatility, Blackrock Gbl Alloc is 1.98 times less risky than Vanguard Small. It trades about 0.06 of its potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,513  in Vanguard Small Cap Index on September 21, 2024 and sell it today you would earn a total of  3,032  from holding Vanguard Small Cap Index or generate 35.62% return on investment over 90 days.

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

Blackrock Gbl Alloc  vs.  Vanguard Small Cap Index

Blackrock Gbl Alloc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Gbl and Vanguard Small

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

The idea behind Blackrock Gbl Alloc and Vanguard Small Cap 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.