Correlation Between BlackRock MIT and MFS Municipal

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

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

Diversification Opportunities for BlackRock MIT and MFS Municipal

0.91

Correlation Coefficient

BlackRock MIT  MFS Municipal

Almost no diversification

The 3 months correlation between BlackRock and MFS is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock MIT II and MFS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Municipal Income and BlackRock MIT 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 MIT II are associated (or correlated) with MFS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Municipal Income has no effect on the direction of BlackRock MIT i.e., BlackRock MIT and MFS Municipal go up and down completely randomly.

Pair Corralation between BlackRock MIT and MFS Municipal

Considering the 90-day investment horizon BlackRock MIT II is expected to under-perform the MFS Municipal. But the stock apears to be less risky and, when comparing its historical volatility, BlackRock MIT II is 1.18 times less risky than MFS Municipal. The stock trades about -0.19 of its potential returns per unit of risk. The MFS Municipal Income is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  567.00  in MFS Municipal Income on October 1, 2024 and sell it today you would lose (34.00) from holding MFS Municipal Income or give up 6.0% of portfolio value over 90 days.

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

BlackRock MIT II  vs.  MFS Municipal Income

BlackRock MIT II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock MIT II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MFS Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BlackRock MIT and MFS Municipal

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

The idea behind BlackRock MIT II and MFS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.