Correlation Between Blackrock California and Managed Account

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

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

Diversification Opportunities for Blackrock California and Managed Account

0.7

Correlation Coefficient

Blackrock California  Managed Account

Poor diversification

The 3 months correlation between Blackrock and Managed is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock California Municipal and Managed Account Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Account Series and Blackrock California 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 California Municipal are associated (or correlated) with Managed Account. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Account Series has no effect on the direction of Blackrock California i.e., Blackrock California and Managed Account go up and down completely randomly.

Pair Corralation between Blackrock California and Managed Account

Assuming the 90 days horizon Blackrock California is expected to generate 14.48 times less return on investment than Managed Account. But when comparing it to its historical volatility, Blackrock California Municipal is 1.02 times less risky than Managed Account. It trades about 0.01 of its potential returns per unit of risk. Managed Account Series is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  877.00  in Managed Account Series on December 30, 2024 and sell it today you would earn a total of  23.00  from holding Managed Account Series or generate 2.62% return on investment over 90 days.

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

Blackrock California Municipal  vs.  Managed Account Series

Blackrock California

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock California Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Blackrock California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Managed Account Series

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Managed Account Series are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Managed Account 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 California and Managed Account

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

The idea behind Blackrock California Municipal and Managed Account Series 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.