Correlation Between Blackrock Muniholdings and Invesco Municipal

Can any of the company-specific risk be diversified away by investing in both Blackrock Muniholdings and Invesco Municipal 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 Invesco Municipal 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 Invesco Municipal Trust, you can compare the effects of market volatilities on Blackrock Muniholdings and Invesco Municipal 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 Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muniholdings and Invesco Municipal.

Diversification Opportunities for Blackrock Muniholdings and Invesco Municipal

0.89

Correlation Coefficient

Blackrock Muniholdings  Invesco Municipal

Very poor diversification

The 3 months correlation between Blackrock and Invesco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniholdings Ny and Invesco Municipal Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Trust 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 Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Trust has no effect on the direction of Blackrock Muniholdings i.e., Blackrock Muniholdings and Invesco Municipal go up and down completely randomly.

Pair Corralation between Blackrock Muniholdings and Invesco Municipal

Considering the 90-day investment horizon Blackrock Muniholdings is expected to generate 1.39 times less return on investment than Invesco Municipal. But when comparing it to its historical volatility, Blackrock Muniholdings Ny is 1.25 times less risky than Invesco Municipal. It trades about 0.18 of its potential returns per unit of risk. Invesco Municipal Trust is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  955.00  in Invesco Municipal Trust on October 21, 2024 and sell it today you would earn a total of  26.00  from holding Invesco Municipal Trust or generate 2.72% return on investment over 90 days.

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

Blackrock Muniholdings Ny  vs.  Invesco Municipal Trust

Blackrock Muniholdings

Risk-Adjusted Performance

0 of 100

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.

Invesco Municipal Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Municipal Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Invesco Municipal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Blackrock Muniholdings and Invesco Municipal

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

The idea behind Blackrock Muniholdings Ny and Invesco Municipal Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.