Correlation Between DTF Tax and BlackRock MIT

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

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

Diversification Opportunities for DTF Tax and BlackRock MIT

0.5

Correlation Coefficient

DTF Tax  BlackRock MIT

Very weak diversification

The 3 months correlation between DTF and BlackRock is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and BlackRock MIT II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock MIT II and DTF Tax 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 DTF Tax Free are associated (or correlated) with BlackRock MIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock MIT II has no effect on the direction of DTF Tax i.e., DTF Tax and BlackRock MIT go up and down completely randomly.

Pair Corralation between DTF Tax and BlackRock MIT

Considering the 90-day investment horizon DTF Tax Free is expected to generate 0.74 times more return on investment than BlackRock MIT. However, DTF Tax Free is 1.36 times less risky than BlackRock MIT. It trades about -0.02 of its potential returns per unit of risk. BlackRock MIT II is currently generating about -0.19 per unit of risk. If you would invest  1,120  in DTF Tax Free on October 1, 2024 and sell it today you would lose (7.00) from holding DTF Tax Free or give up 0.62% of portfolio value over 90 days.

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

DTF Tax Free  vs.  BlackRock MIT II

DTF Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTF Tax Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with DTF Tax and BlackRock MIT

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

The idea behind DTF Tax Free and BlackRock MIT II 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.

Check out your portfolio center.

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.