Correlation Between Xtrackers California and BlackRock High

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

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

Diversification Opportunities for Xtrackers California and BlackRock High

0.96

Correlation Coefficient

Xtrackers California  BlackRock High

Almost no diversification

The 3 months correlation between Xtrackers and BlackRock is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and BlackRock High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock High Yield and Xtrackers California 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 Xtrackers California Municipal are associated (or correlated) with BlackRock High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock High Yield has no effect on the direction of Xtrackers California i.e., Xtrackers California and BlackRock High go up and down completely randomly.

Pair Corralation between Xtrackers California and BlackRock High

Allowing for the 90-day total investment horizon Xtrackers California is expected to generate 3.44 times less return on investment than BlackRock High. But when comparing it to its historical volatility, Xtrackers California Municipal is 1.14 times less risky than BlackRock High. It trades about 0.01 of its potential returns per unit of risk. BlackRock High Yield is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,291  in BlackRock High Yield on September 17, 2024 and sell it today you would earn a total of  7.50  from holding BlackRock High Yield or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Xtrackers California Municipal  vs.  BlackRock High Yield

Xtrackers California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BlackRock High Yield

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock High Yield are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, BlackRock High is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers California and BlackRock High

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

The idea behind Xtrackers California Municipal and BlackRock High Yield 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.