Correlation Between Blackrock Muniholdings and Ares Dynamic

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

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

Diversification Opportunities for Blackrock Muniholdings and Ares Dynamic

0.73

Correlation Coefficient

Blackrock Muniholdings  Ares Dynamic

Poor diversification

The 3 months correlation between Blackrock and Ares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniholdings Quality and Ares Dynamic Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Dynamic Credit 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 Quality are associated (or correlated) with Ares Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Dynamic Credit has no effect on the direction of Blackrock Muniholdings i.e., Blackrock Muniholdings and Ares Dynamic go up and down completely randomly.

Pair Corralation between Blackrock Muniholdings and Ares Dynamic

Considering the 90-day investment horizon Blackrock Muniholdings Quality is expected to under-perform the Ares Dynamic. In addition to that, Blackrock Muniholdings is 1.46 times more volatile than Ares Dynamic Credit. It trades about -0.28 of its total potential returns per unit of risk. Ares Dynamic Credit is currently generating about -0.18 per unit of volatility. If you would invest  1,527  in Ares Dynamic Credit on September 23, 2024 and sell it today you would lose (33.00) from holding Ares Dynamic Credit or give up 2.16% of portfolio value over 90 days.

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

Blackrock Muniholdings Quality  vs.  Ares Dynamic Credit

Blackrock Muniholdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ares Dynamic Credit

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Dynamic Credit are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound fundamental indicators, Ares Dynamic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blackrock Muniholdings and Ares Dynamic

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

The idea behind Blackrock Muniholdings Quality and Ares Dynamic Credit 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.