Correlation Between Smead Value and Blackrock

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

By analyzing existing cross correlation between Smead Value Fund and Blackrock Hi Yld, you can compare the effects of market volatilities on Smead Value and Blackrock 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 Smead Value with a short position of Blackrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smead Value and Blackrock.

Diversification Opportunities for Smead Value and Blackrock

0.04

Correlation Coefficient

Smead Value  Blackrock

Significant diversification

The 3 months correlation between Smead and Blackrock is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Blackrock Hi Yld in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Hi Yld and Smead Value 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 Smead Value Fund are associated (or correlated) with Blackrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Hi Yld has no effect on the direction of Smead Value i.e., Smead Value and Blackrock go up and down completely randomly.

Pair Corralation between Smead Value and Blackrock

Assuming the 90 days horizon Smead Value Fund is expected to under-perform the Blackrock. In addition to that, Smead Value is 5.0 times more volatile than Blackrock Hi Yld. It trades about -0.04 of its total potential returns per unit of risk. Blackrock Hi Yld is currently generating about 0.11 per unit of volatility. If you would invest  712.00  in Blackrock Hi Yld on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Blackrock Hi Yld or generate 1.12% return on investment over 90 days.

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

Smead Value Fund  vs.  Blackrock Hi Yld

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Blackrock Hi Yld

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Hi Yld are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Blackrock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smead Value and Blackrock

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

The idea behind Smead Value Fund and Blackrock Hi Yld 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.