Correlation Between Vanguard Small-cap and Blackrock Focus
Can any of the company-specific risk be diversified away by investing in both Vanguard Small-cap and Blackrock Focus 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 Focus 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 Focus Growth, you can compare the effects of market volatilities on Vanguard Small-cap and Blackrock Focus 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 Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Blackrock Focus.
Diversification Opportunities for Vanguard Small-cap and Blackrock Focus
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Blackrock is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value and Blackrock Focus Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Focus Growth 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 Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Focus Growth has no effect on the direction of Vanguard Small-cap i.e., Vanguard Small-cap and Blackrock Focus go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and Blackrock Focus
Assuming the 90 days horizon Vanguard Small-cap is expected to generate 1.66 times less return on investment than Blackrock Focus. But when comparing it to its historical volatility, Vanguard Small Cap Value is 1.08 times less risky than Blackrock Focus. It trades about 0.07 of its potential returns per unit of risk. Blackrock Focus Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 442.00 in Blackrock Focus Growth on August 30, 2024 and sell it today you would earn a total of 333.00 from holding Blackrock Focus Growth or generate 75.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Value vs. Blackrock Focus Growth
Performance |
| Timeline |
| Vanguard Small Cap |
| Blackrock Focus Growth |
Vanguard Small-cap and Blackrock Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and Blackrock Focus
The main advantage of trading using opposite Vanguard Small-cap and Blackrock Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Blackrock Focus 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 Focus will offset losses from the drop in Blackrock Focus' long position.The idea behind Vanguard Small Cap Value and Blackrock Focus Growth 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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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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