Correlation Between Blackrock Lifepath and Extended Market
Can any of the company-specific risk be diversified away by investing in both Blackrock Lifepath and Extended Market 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 Lifepath and Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackrock Lifepath Dynamic and Extended Market Index, you can compare the effects of market volatilities on Blackrock Lifepath and Extended Market 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 Lifepath with a short position of Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Lifepath and Extended Market.
Diversification Opportunities for Blackrock Lifepath and Extended Market
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blackrock and Extended is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Lifepath Dynamic and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index and Blackrock Lifepath 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 Lifepath Dynamic are associated (or correlated) with Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Blackrock Lifepath i.e., Blackrock Lifepath and Extended Market go up and down completely randomly.
Pair Corralation between Blackrock Lifepath and Extended Market
Assuming the 90 days horizon Blackrock Lifepath is expected to generate 5.97 times less return on investment than Extended Market. But when comparing it to its historical volatility, Blackrock Lifepath Dynamic is 2.41 times less risky than Extended Market. It trades about 0.11 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,325 in Extended Market Index on August 30, 2024 and sell it today you would earn a total of 188.00 from holding Extended Market Index or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blackrock Lifepath Dynamic vs. Extended Market Index
Performance |
| Timeline |
| Blackrock Lifepath |
| Extended Market Index |
Blackrock Lifepath and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blackrock Lifepath and Extended Market
The main advantage of trading using opposite Blackrock Lifepath and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Lifepath position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| Blackrock Lifepath vs. T Rowe Price | Blackrock Lifepath vs. Washington Mutual Investors | Blackrock Lifepath vs. T Rowe Price | Blackrock Lifepath vs. T Rowe Price |
| Extended Market vs. Legg Mason Partners | Extended Market vs. Dodge Cox Emerging | Extended Market vs. Barings Emerging Markets | Extended Market vs. Black Oak Emerging |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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