Correlation Between Blackrock Muniyield and First Trust

Can any of the company-specific risk be diversified away by investing in both Blackrock Muniyield 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 Muniyield 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 Muniyield and First Trust Senior, you can compare the effects of market volatilities on Blackrock Muniyield 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 Muniyield with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muniyield and First Trust.

Diversification Opportunities for Blackrock Muniyield and First Trust

-0.37

Correlation Coefficient

Blackrock Muniyield  First Trust

Very good diversification

The 3 months correlation between Blackrock and First is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniyield and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 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 Senior has no effect on the direction of Blackrock Muniyield i.e., Blackrock Muniyield and First Trust go up and down completely randomly.

Pair Corralation between Blackrock Muniyield and First Trust

Considering the 90-day investment horizon Blackrock Muniyield is expected to under-perform the First Trust. But the fund apears to be less risky and, when comparing its historical volatility, Blackrock Muniyield is 1.06 times less risky than First Trust. The fund trades about -0.01 of its potential returns per unit of risk. The First Trust Senior is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  961.00  in First Trust Senior on September 27, 2024 and sell it today you would earn a total of  83.00  from holding First Trust Senior or generate 8.64% return on investment over 90 days.

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

Blackrock Muniyield  vs.  First Trust Senior

Blackrock Muniyield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Muniyield has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest inconsistent performance, the Fund's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

First Trust Senior

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Blackrock Muniyield and First Trust

The main advantage of trading using opposite Blackrock Muniyield and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Muniyield 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 Muniyield and First Trust Senior 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.