Correlation Between Blackrock Muniyield and NXG NextGen

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

Diversification Opportunities for Blackrock Muniyield and NXG NextGen

0.39

Correlation Coefficient

Blackrock Muniyield  NXG NextGen

Weak diversification

The 3 months correlation between Blackrock and NXG is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniyield 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 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 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 Muniyield i.e., Blackrock Muniyield and NXG NextGen go up and down completely randomly.

Pair Corralation between Blackrock Muniyield and NXG NextGen

Considering the 90-day investment horizon Blackrock Muniyield is expected to generate 0.45 times more return on investment than NXG NextGen. However, Blackrock Muniyield is 2.22 times less risky than NXG NextGen. It trades about 0.2 of its potential returns per unit of risk. NXG NextGen Infrastructure is currently generating about 0.04 per unit of risk. If you would invest  1,061  in Blackrock Muniyield on November 29, 2024 and sell it today you would earn a total of  23.00  from holding Blackrock Muniyield or generate 2.17% return on investment over 90 days.

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

Blackrock Muniyield  vs.  NXG NextGen Infrastructure

Blackrock Muniyield

Risk-Adjusted Performance

Very Weak

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

NXG NextGen Infrastr

Risk-Adjusted Performance

Very Weak

Over the last 90 days NXG NextGen Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Blackrock Muniyield and NXG NextGen

The main advantage of trading using opposite Blackrock Muniyield and NXG NextGen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackrock Muniyield 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 Muniyield 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.