Correlation Between Vanguard Small-cap and Blackrock Strategic

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

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

Diversification Opportunities for Vanguard Small-cap and Blackrock Strategic

-0.33

Correlation Coefficient

Vanguard Small-cap  Blackrock Strategic

Very good diversification

The 3 months correlation between Vanguard and Blackrock is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Blackrock Strategic Opps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Strategic Opps and Vanguard Small-cap 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 Vanguard Small Cap Value are associated (or correlated) with Blackrock Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Strategic Opps has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Blackrock Strategic go up and down completely randomly.

Pair Corralation between Vanguard Small-cap and Blackrock Strategic

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 5.83 times more return on investment than Blackrock Strategic. However, Vanguard Small-cap is 5.83 times more volatile than Blackrock Strategic Opps. It trades about 0.11 of its potential returns per unit of risk. Blackrock Strategic Opps is currently generating about 0.17 per unit of risk. If you would invest  4,428  in Vanguard Small Cap Value on September 3, 2024 and sell it today you would earn a total of  750.00  from holding Vanguard Small Cap Value or generate 16.94% return on investment over 90 days.

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

Vanguard Small Cap Value  vs.  Blackrock Strategic Opps

Vanguard Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blackrock Strategic Opps

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Strategic Opps are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Blackrock Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Small-cap and Blackrock Strategic

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

The idea behind Vanguard Small Cap Value and Blackrock Strategic Opps 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 Anywhere module to track or share privately all of your investments from the convenience of any device.