Correlation Between Exchange Bank and BlackRock Municipal

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

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

Diversification Opportunities for Exchange Bank and BlackRock Municipal

0.16

Correlation Coefficient

Exchange Bank  BlackRock Municipal

Average diversification

The 3 months correlation between Exchange and BlackRock is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bank and BlackRock Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Municipal and Exchange Bank 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 Exchange Bank are associated (or correlated) with BlackRock Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Municipal has no effect on the direction of Exchange Bank i.e., Exchange Bank and BlackRock Municipal go up and down completely randomly.

Pair Corralation between Exchange Bank and BlackRock Municipal

Given the investment horizon of 90 days Exchange Bank is expected to generate 3.57 times more return on investment than BlackRock Municipal. However, Exchange Bank is 3.57 times more volatile than BlackRock Municipal Income. It trades about 0.0 of its potential returns per unit of risk. BlackRock Municipal Income is currently generating about -0.12 per unit of risk. If you would invest  10,769  in Exchange Bank on October 9, 2024 and sell it today you would lose (169.00) from holding Exchange Bank or give up 1.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Exchange Bank  vs.  BlackRock Municipal Income

Exchange Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exchange Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Exchange Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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. Despite quite persistent technical and fundamental indicators, BlackRock Municipal 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 Exchange Bank and BlackRock Municipal

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

The idea behind Exchange Bank and BlackRock 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.