Correlation Between Blackrock Moderate and Moderately Aggressive

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

By analyzing existing cross correlation between Blackrock Moderate Prepared and Moderately Aggressive Balanced, you can compare the effects of market volatilities on Blackrock Moderate and Moderately Aggressive 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 Moderate with a short position of Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Moderate and Moderately Aggressive.

Diversification Opportunities for Blackrock Moderate and Moderately Aggressive

0.8

Correlation Coefficient

Blackrock Moderate  Moderately Aggressive

Very poor diversification

The 3 months correlation between Blackrock and Moderately is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Moderate Prepared and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive and Blackrock Moderate 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 Moderate Prepared are associated (or correlated) with Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Blackrock Moderate i.e., Blackrock Moderate and Moderately Aggressive go up and down completely randomly.

Pair Corralation between Blackrock Moderate and Moderately Aggressive

Assuming the 90 days horizon Blackrock Moderate is expected to generate 1.2 times less return on investment than Moderately Aggressive. But when comparing it to its historical volatility, Blackrock Moderate Prepared is 1.3 times less risky than Moderately Aggressive. It trades about 0.12 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Moderately Aggressive Balanced on August 12, 2024 and sell it today you would earn a total of  96.00  from holding Moderately Aggressive Balanced or generate 8.37% return on investment over 90 days.

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

Blackrock Moderate Prepared  vs.  Moderately Aggressive Balanced

Blackrock Moderate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Moderate Prepared are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blackrock Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Moderately Aggressive

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Aggressive Balanced are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Moderately Aggressive may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Blackrock Moderate and Moderately Aggressive

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

The idea behind Blackrock Moderate Prepared and Moderately Aggressive Balanced 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.