Correlation Between Blackrock Muni and First Trust

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

By analyzing existing cross correlation between Blackrock Muni Intermediate and First Trust Enhanced, you can compare the effects of market volatilities on Blackrock Muni and First Trust 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 Muni with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muni and First Trust.

Diversification Opportunities for Blackrock Muni and First Trust

0.32

Correlation Coefficient

Blackrock Muni  First Trust

Weak diversification

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

Pair Corralation between Blackrock Muni and First Trust

Considering the 90-day investment horizon Blackrock Muni Intermediate is expected to generate 0.78 times more return on investment than First Trust. However, Blackrock Muni Intermediate is 1.28 times less risky than First Trust. It trades about 0.02 of its potential returns per unit of risk. First Trust Enhanced is currently generating about -0.1 per unit of risk. If you would invest  1,205  in Blackrock Muni Intermediate on December 28, 2024 and sell it today you would earn a total of  4.00  from holding Blackrock Muni Intermediate or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.66%
Values	Daily Returns

Blackrock Muni Intermediate  vs.  First Trust Enhanced

Blackrock Muni Inter

Risk-Adjusted Performance

Weak

Over the last 90 days Blackrock Muni Intermediate has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong basic indicators, Blackrock Muni is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, First Trust 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 Muni and First Trust

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

The idea behind Blackrock Muni Intermediate and First Trust Enhanced 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.