Correlation Between Blackrock Muniholdings and Franklin Liberty

Can any of the company-specific risk be diversified away by investing in both Blackrock Muniholdings 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 Muniholdings 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 Muniholdings Closed and Franklin Liberty High, you can compare the effects of market volatilities on Blackrock Muniholdings 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 Muniholdings with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muniholdings and Franklin Liberty.

Diversification Opportunities for Blackrock Muniholdings and Franklin Liberty

0.46

Correlation Coefficient

Blackrock Muniholdings  Franklin Liberty

Very weak diversification

The 3 months correlation between Blackrock and Franklin is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniholdings Closed and Franklin Liberty High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty High and Blackrock Muniholdings 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 Muniholdings Closed 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 High has no effect on the direction of Blackrock Muniholdings i.e., Blackrock Muniholdings and Franklin Liberty go up and down completely randomly.

Pair Corralation between Blackrock Muniholdings and Franklin Liberty

Considering the 90-day investment horizon Blackrock Muniholdings Closed is expected to under-perform the Franklin Liberty. In addition to that, Blackrock Muniholdings is 3.14 times more volatile than Franklin Liberty High. It trades about -0.07 of its total potential returns per unit of risk. Franklin Liberty High is currently generating about -0.01 per unit of volatility. If you would invest  2,400  in Franklin Liberty High on September 15, 2024 and sell it today you would lose (5.00) from holding Franklin Liberty High or give up 0.21% of portfolio value over 90 days.

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

Blackrock Muniholdings Closed  vs.  Franklin Liberty High

Blackrock Muniholdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Muniholdings Closed has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical indicators, Blackrock Muniholdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Franklin Liberty High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty High has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Franklin Liberty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Blackrock Muniholdings and Franklin Liberty

The main advantage of trading using opposite Blackrock Muniholdings and Franklin Liberty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Muniholdings 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 Muniholdings Closed and Franklin Liberty High 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.