Correlation Between Blackrock Muniyield and Invesco California

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

By analyzing existing cross correlation between Blackrock Muniyield and Invesco California Value, you can compare the effects of market volatilities on Blackrock Muniyield and Invesco California 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 Invesco California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muniyield and Invesco California.

Diversification Opportunities for Blackrock Muniyield and Invesco California

-0.4

Correlation Coefficient

Blackrock Muniyield  Invesco California

Very good diversification

The 3 months correlation between Blackrock and Invesco is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniyield and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value 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 Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of Blackrock Muniyield i.e., Blackrock Muniyield and Invesco California go up and down completely randomly.

Pair Corralation between Blackrock Muniyield and Invesco California

Considering the 90-day investment horizon Blackrock Muniyield is expected to under-perform the Invesco California. But the fund apears to be less risky and, when comparing its historical volatility, Blackrock Muniyield is 1.15 times less risky than Invesco California. The fund trades about -0.1 of its potential returns per unit of risk. The Invesco California Value is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,037  in Invesco California Value on November 29, 2024 and sell it today you would earn a total of  74.00  from holding Invesco California Value or generate 7.14% return on investment over 90 days.

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

Blackrock Muniyield  vs.  Invesco California Value

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.

Invesco California Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco California Value are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Invesco California may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Blackrock Muniyield and Invesco California

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

The idea behind Blackrock Muniyield and Invesco California Value 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.