Correlation Between BlackRock Intermediate and Franklin Liberty

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

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

Diversification Opportunities for BlackRock Intermediate and Franklin Liberty

0.9

Correlation Coefficient

BlackRock Intermediate  Franklin Liberty

Almost no diversification

The 3 months correlation between BlackRock and Franklin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Intermediate Muni and Franklin Liberty Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Int and BlackRock Intermediate 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 Intermediate Muni are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Int has no effect on the direction of BlackRock Intermediate i.e., BlackRock Intermediate and Franklin Liberty go up and down completely randomly.

Pair Corralation between BlackRock Intermediate and Franklin Liberty

Given the investment horizon of 90 days BlackRock Intermediate Muni is expected to generate 1.01 times more return on investment than Franklin Liberty. However, BlackRock Intermediate is 1.01 times more volatile than Franklin Liberty Intermediate. It trades about -0.09 of its potential returns per unit of risk. Franklin Liberty Intermediate is currently generating about -0.14 per unit of risk. If you would invest  2,370  in BlackRock Intermediate Muni on September 26, 2024 and sell it today you would lose (15.00) from holding BlackRock Intermediate Muni or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

BlackRock Intermediate Muni  vs.  Franklin Liberty Intermediate

BlackRock Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Franklin Liberty Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Franklin Liberty is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BlackRock Intermediate and Franklin Liberty

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

The idea behind BlackRock Intermediate Muni and Franklin Liberty Intermediate 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.