Correlation Between BlackRock ESG and Small Capitalization

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

By analyzing existing cross correlation between BlackRock ESG Capital and Small Capitalization Portfolio, you can compare the effects of market volatilities on BlackRock ESG and Small Capitalization 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 ESG with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock ESG and Small Capitalization.

Diversification Opportunities for BlackRock ESG and Small Capitalization

0.9

Correlation Coefficient

BlackRock ESG  Small Capitalization

Almost no diversification

The 3 months correlation between BlackRock and Small is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock ESG Capital and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and BlackRock ESG 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 ESG Capital are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of BlackRock ESG i.e., BlackRock ESG and Small Capitalization go up and down completely randomly.

Pair Corralation between BlackRock ESG and Small Capitalization

Given the investment horizon of 90 days BlackRock ESG Capital is expected to generate 0.65 times more return on investment than Small Capitalization. However, BlackRock ESG Capital is 1.54 times less risky than Small Capitalization. It trades about 0.21 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about 0.11 per unit of risk. If you would invest  1,488  in BlackRock ESG Capital on May 4, 2025 and sell it today you would earn a total of  137.00  from holding BlackRock ESG Capital or generate 9.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

BlackRock ESG Capital  vs.  Small Capitalization Portfolio

BlackRock ESG Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock ESG Capital are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BlackRock ESG may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Small Capitalization

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Capitalization Portfolio are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Capitalization may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with BlackRock ESG and Small Capitalization

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

The idea behind BlackRock ESG Capital and Small Capitalization Portfolio 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.