Correlation Between BlackRock Municipal and Security Federal

Can any of the company-specific risk be diversified away by investing in both BlackRock Municipal and Security Federal 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 Security Federal 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 Security Federal, you can compare the effects of market volatilities on BlackRock Municipal and Security Federal 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 Security Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Municipal and Security Federal.

Diversification Opportunities for BlackRock Municipal and Security Federal

0.14

Correlation Coefficient

BlackRock Municipal  Security Federal

Average diversification

The 3 months correlation between BlackRock and Security is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Municipal Income and Security Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Federal 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 Security Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Federal has no effect on the direction of BlackRock Municipal i.e., BlackRock Municipal and Security Federal go up and down completely randomly.

Pair Corralation between BlackRock Municipal and Security Federal

Considering the 90-day investment horizon BlackRock Municipal is expected to generate 13.17 times less return on investment than Security Federal. But when comparing it to its historical volatility, BlackRock Municipal Income is 1.73 times less risky than Security Federal. It trades about 0.02 of its potential returns per unit of risk. Security Federal is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,175  in Security Federal on October 9, 2024 and sell it today you would earn a total of  550.00  from holding Security Federal or generate 25.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.02%
Values	Daily Returns

BlackRock Municipal Income  vs.  Security Federal

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Security Federal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Security Federal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Security Federal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BlackRock Municipal and Security Federal

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

The idea behind BlackRock Municipal Income and Security Federal 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 Anywhere module to track or share privately all of your investments from the convenience of any device.