Correlation Between Blackrock Health and California Municipal

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

By analyzing existing cross correlation between Blackrock Health Sciences and California Municipal Portfolio, you can compare the effects of market volatilities on Blackrock Health and California Municipal 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 Health with a short position of California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Health and California Municipal.

Diversification Opportunities for Blackrock Health and California Municipal

0.54

Correlation Coefficient

Blackrock Health  California Municipal

Very weak diversification

The 3 months correlation between Blackrock and California is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Health Sciences and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal and Blackrock Health 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 Health Sciences are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Blackrock Health i.e., Blackrock Health and California Municipal go up and down completely randomly.

Pair Corralation between Blackrock Health and California Municipal

Assuming the 90 days horizon Blackrock Health Sciences is expected to under-perform the California Municipal. In addition to that, Blackrock Health is 5.67 times more volatile than California Municipal Portfolio. It trades about -0.18 of its total potential returns per unit of risk. California Municipal Portfolio is currently generating about -0.07 per unit of volatility. If you would invest  1,395  in California Municipal Portfolio on October 10, 2024 and sell it today you would lose (11.00) from holding California Municipal Portfolio or give up 0.79% of portfolio value over 90 days.

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

Blackrock Health Sciences  vs.  California Municipal Portfolio

Blackrock Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Health Sciences has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blackrock Health and California Municipal

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

The idea behind Blackrock Health Sciences and California Municipal 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 Stocks Directory module to find actively traded stocks across global markets.