Correlation Between BlackRock Investment and BlackRock Municipal

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

By analyzing existing cross correlation between BlackRock Investment Quality and BlackRock Municipal Income, you can compare the effects of market volatilities on BlackRock Investment and BlackRock 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 Investment with a short position of BlackRock Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Investment and BlackRock Municipal.

Diversification Opportunities for BlackRock Investment and BlackRock Municipal

0.86

Correlation Coefficient

BlackRock Investment  BlackRock Municipal

Very poor diversification

The 3 months correlation between BlackRock and BlackRock is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Investment Quality and BlackRock Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Municipal and BlackRock Investment 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 Investment Quality are associated (or correlated) with BlackRock Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Municipal has no effect on the direction of BlackRock Investment i.e., BlackRock Investment and BlackRock Municipal go up and down completely randomly.

Pair Corralation between BlackRock Investment and BlackRock Municipal

Considering the 90-day investment horizon BlackRock Investment Quality is expected to under-perform the BlackRock Municipal. In addition to that, BlackRock Investment is 1.17 times more volatile than BlackRock Municipal Income. It trades about -0.37 of its total potential returns per unit of risk. BlackRock Municipal Income is currently generating about -0.21 per unit of volatility. If you would invest  1,057  in BlackRock Municipal Income on October 1, 2024 and sell it today you would lose (78.00) from holding BlackRock Municipal Income or give up 7.38% of portfolio value over 90 days.

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

BlackRock Investment Quality  vs.  BlackRock Municipal Income

BlackRock Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Investment Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BlackRock Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with BlackRock Investment and BlackRock Municipal

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

The idea behind BlackRock Investment Quality and BlackRock Municipal Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.