Correlation Between BlackRock Municipal and First National

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

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

Diversification Opportunities for BlackRock Municipal and First National

-0.37

Correlation Coefficient

BlackRock Municipal  First National

Very good diversification

The 3 months correlation between BlackRock and First is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Municipal Income and First National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Bank and BlackRock 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 BlackRock Municipal Income are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Bank has no effect on the direction of BlackRock Municipal i.e., BlackRock Municipal and First National go up and down completely randomly.

Pair Corralation between BlackRock Municipal and First National

Considering the 90-day investment horizon BlackRock Municipal Income is expected to generate 0.49 times more return on investment than First National. However, BlackRock Municipal Income is 2.04 times less risky than First National. It trades about 0.24 of its potential returns per unit of risk. First National Bank is currently generating about -0.07 per unit of risk. If you would invest  1,073  in BlackRock Municipal Income on October 25, 2024 and sell it today you would earn a total of  30.00  from holding BlackRock Municipal Income or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

BlackRock Municipal Income  vs.  First National Bank

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. In spite of very healthy basic indicators, BlackRock Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

First National Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First National Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, First National disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock Municipal and First National

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

The idea behind BlackRock Municipal Income and First National Bank 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.