Correlation Between BlackRock High and Xtrackers California

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

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

Diversification Opportunities for BlackRock High and Xtrackers California

0.01

Correlation Coefficient

BlackRock High  Xtrackers California

Significant diversification

The 3 months correlation between BlackRock and Xtrackers is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock High Yield and Xtrackers California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers California and BlackRock High 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 High Yield are associated (or correlated) with Xtrackers California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers California has no effect on the direction of BlackRock High i.e., BlackRock High and Xtrackers California go up and down completely randomly.

Pair Corralation between BlackRock High and Xtrackers California

Given the investment horizon of 90 days BlackRock High Yield is expected to generate 1.16 times more return on investment than Xtrackers California. However, BlackRock High is 1.16 times more volatile than Xtrackers California Municipal. It trades about -0.04 of its potential returns per unit of risk. Xtrackers California Municipal is currently generating about -0.05 per unit of risk. If you would invest  2,299  in BlackRock High Yield on December 5, 2024 and sell it today you would lose (12.00) from holding BlackRock High Yield or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.58%
Values	Daily Returns

BlackRock High Yield  vs.  Xtrackers California Municipal

BlackRock High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, BlackRock High is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Xtrackers California

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BlackRock High and Xtrackers California

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

The idea behind BlackRock High Yield and Xtrackers California Municipal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.