Correlation Between Blackrock Muniholdings and American Business

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

By analyzing existing cross correlation between Blackrock Muniholdings Ny and American Business Bk, you can compare the effects of market volatilities on Blackrock Muniholdings and American Business 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 American Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muniholdings and American Business.

Diversification Opportunities for Blackrock Muniholdings and American Business

0.32

Correlation Coefficient

Blackrock Muniholdings  American Business

Weak diversification

The 3 months correlation between Blackrock and American is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniholdings Ny and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business 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 Ny are associated (or correlated) with American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Blackrock Muniholdings i.e., Blackrock Muniholdings and American Business go up and down completely randomly.

Pair Corralation between Blackrock Muniholdings and American Business

Considering the 90-day investment horizon Blackrock Muniholdings Ny is expected to under-perform the American Business. But the fund apears to be less risky and, when comparing its historical volatility, Blackrock Muniholdings Ny is 2.41 times less risky than American Business. The fund trades about -0.02 of its potential returns per unit of risk. The American Business Bk is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,325  in American Business Bk on December 30, 2024 and sell it today you would earn a total of  158.00  from holding American Business Bk or generate 3.65% return on investment over 90 days.

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

Blackrock Muniholdings Ny  vs.  American Business Bk

Blackrock Muniholdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Muniholdings Ny has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy technical indicators, Blackrock Muniholdings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

American Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, American Business 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 American Business

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

The idea behind Blackrock Muniholdings Ny and American Business Bk 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.