Correlation Between Blackrock Muniyield and BlackRock Municipal

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

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

Diversification Opportunities for Blackrock Muniyield and BlackRock Municipal

0.95

Correlation Coefficient

Blackrock Muniyield  BlackRock Municipal

Almost no diversification

The 3 months correlation between Blackrock and BlackRock is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniyield Quality and BlackRock Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Municipal and Blackrock Muniyield 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 Muniyield Quality are associated (or correlated) with BlackRock Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Municipal has no effect on the direction of Blackrock Muniyield i.e., Blackrock Muniyield and BlackRock Municipal go up and down completely randomly.

Pair Corralation between Blackrock Muniyield and BlackRock Municipal

Considering the 90-day investment horizon Blackrock Muniyield Quality is expected to generate 0.94 times more return on investment than BlackRock Municipal. However, Blackrock Muniyield Quality is 1.07 times less risky than BlackRock Municipal. It trades about -0.34 of its potential returns per unit of risk. BlackRock Municipal Income is currently generating about -0.35 per unit of risk. If you would invest  1,051  in Blackrock Muniyield Quality on October 6, 2024 and sell it today you would lose (50.00) from holding Blackrock Muniyield Quality or give up 4.76% of portfolio value over 90 days.

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

Blackrock Muniyield Quality  vs.  BlackRock Municipal Income

Blackrock Muniyield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Muniyield Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Blackrock Muniyield is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BlackRock Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Blackrock Muniyield and BlackRock Municipal

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

The idea behind Blackrock Muniyield Quality and BlackRock Municipal Income 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.