Correlation Between MFS Municipal and Blackrock Muniyield

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

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

Diversification Opportunities for MFS Municipal and Blackrock Muniyield

0.9

Correlation Coefficient

MFS Municipal  Blackrock Muniyield

Almost no diversification

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

Pair Corralation between MFS Municipal and Blackrock Muniyield

Considering the 90-day investment horizon MFS Municipal is expected to generate 2.34 times less return on investment than Blackrock Muniyield. In addition to that, MFS Municipal is 1.28 times more volatile than Blackrock Muniyield. It trades about 0.02 of its total potential returns per unit of risk. Blackrock Muniyield is currently generating about 0.06 per unit of volatility. If you would invest  1,024  in Blackrock Muniyield on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Blackrock Muniyield or generate 2.05% return on investment over 90 days.

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

MFS Municipal Income  vs.  Blackrock Muniyield

MFS Municipal Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Municipal Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Blackrock Muniyield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniyield are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Blackrock Muniyield is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MFS Municipal and Blackrock Muniyield

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

The idea behind MFS Municipal Income and Blackrock Muniyield 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.