Correlation Between High-yield Municipal and B Riley

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and B Riley 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 High-yield Municipal and B Riley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and B Riley Financial, you can compare the effects of market volatilities on High-yield Municipal and B Riley 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 High-yield Municipal with a short position of B Riley. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and B Riley.

Diversification Opportunities for High-yield Municipal and B Riley

-0.05

Correlation Coefficient

High-yield Municipal  B Riley

Good diversification

The 3 months correlation between High-yield and RILYG is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and B Riley go up and down completely randomly.

Pair Corralation between High-yield Municipal and B Riley

Assuming the 90 days horizon High-yield Municipal is expected to generate 10.15 times less return on investment than B Riley. But when comparing it to its historical volatility, High Yield Municipal Fund is 6.32 times less risky than B Riley. It trades about 0.05 of its potential returns per unit of risk. B Riley Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,155  in B Riley Financial on October 7, 2024 and sell it today you would earn a total of  63.00  from holding B Riley Financial or generate 5.45% return on investment over 90 days.

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

High Yield Municipal Fund  vs.  B Riley Financial

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

B Riley Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B Riley Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, B Riley reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with High-yield Municipal and B Riley

The main advantage of trading using opposite High-yield Municipal and B Riley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, B Riley 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 B Riley will offset losses from the drop in B Riley's long position.

The idea behind High Yield Municipal Fund and B Riley Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.