Correlation Between Blackrock National and Tax Exempt

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

By analyzing existing cross correlation between Blackrock National Municipal and Tax Exempt Bond, you can compare the effects of market volatilities on Blackrock National and Tax Exempt 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 National with a short position of Tax Exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock National and Tax Exempt.

Diversification Opportunities for Blackrock National and Tax Exempt

0.98

Correlation Coefficient

Blackrock National  Tax Exempt

Almost no diversification

The 3 months correlation between Blackrock and Tax is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock National Municipal and Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond and Blackrock National 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 National Municipal are associated (or correlated) with Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of Blackrock National i.e., Blackrock National and Tax Exempt go up and down completely randomly.

Pair Corralation between Blackrock National and Tax Exempt

Assuming the 90 days horizon Blackrock National is expected to generate 1.16 times less return on investment than Tax Exempt. But when comparing it to its historical volatility, Blackrock National Municipal is 1.07 times less risky than Tax Exempt. It trades about 0.05 of its potential returns per unit of risk. Tax Exempt Bond is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,245  in Tax Exempt Bond on August 31, 2024 and sell it today you would earn a total of  10.00  from holding Tax Exempt Bond or generate 0.8% return on investment over 90 days.

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

Blackrock National Municipal  vs.  Tax Exempt Bond

Blackrock National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock National Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Blackrock National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tax Exempt Bond

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Exempt Bond are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Tax Exempt 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 National and Tax Exempt

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

The idea behind Blackrock National Municipal and Tax Exempt Bond 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.