Correlation Between Blackrock Muni and NXG NextGen

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

Diversification Opportunities for Blackrock Muni and NXG NextGen

0.61

Correlation Coefficient

Blackrock Muni  NXG NextGen

Poor diversification

The 3 months correlation between Blackrock and NXG is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muni Intermediate and NXG NextGen Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXG NextGen Infrastr 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 NXG NextGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXG NextGen Infrastr has no effect on the direction of Blackrock Muni i.e., Blackrock Muni and NXG NextGen go up and down completely randomly.

Pair Corralation between Blackrock Muni and NXG NextGen

Considering the 90-day investment horizon Blackrock Muni is expected to generate 7.84 times less return on investment than NXG NextGen. But when comparing it to its historical volatility, Blackrock Muni Intermediate is 3.27 times less risky than NXG NextGen. It trades about 0.1 of its potential returns per unit of risk. NXG NextGen Infrastructure is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,844  in NXG NextGen Infrastructure on September 8, 2024 and sell it today you would earn a total of  1,109  from holding NXG NextGen Infrastructure or generate 28.85% return on investment over 90 days.

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

Blackrock Muni Intermediate  vs.  NXG NextGen Infrastructure

Blackrock Muni Inter

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muni Intermediate are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Blackrock Muni is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

NXG NextGen Infrastr

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NXG NextGen reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackrock Muni and NXG NextGen

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

The idea behind Blackrock Muni Intermediate and NXG NextGen Infrastructure 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.