Correlation Between Pimco California and Blackrock Muni

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

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

Diversification Opportunities for Pimco California and Blackrock Muni

0.36

Correlation Coefficient

Pimco California  Blackrock Muni

Weak diversification

The 3 months correlation between Pimco and Blackrock is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Blackrock Muni Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muni Inter and Pimco California 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 Pimco California Municipal are associated (or correlated) with Blackrock Muni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muni Inter has no effect on the direction of Pimco California i.e., Pimco California and Blackrock Muni go up and down completely randomly.

Pair Corralation between Pimco California and Blackrock Muni

Considering the 90-day investment horizon Pimco California Municipal is expected to generate 1.07 times more return on investment than Blackrock Muni. However, Pimco California is 1.07 times more volatile than Blackrock Muni Intermediate. It trades about 0.02 of its potential returns per unit of risk. Blackrock Muni Intermediate is currently generating about -0.09 per unit of risk. If you would invest  592.00  in Pimco California Municipal on November 29, 2024 and sell it today you would earn a total of  3.00  from holding Pimco California Municipal or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Pimco California Municipal  vs.  Blackrock Muni Intermediate

Pimco California Mun

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco California Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent fundamental indicators, Pimco California is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Blackrock Muni Inter

Risk-Adjusted Performance

Very 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.

Pair Trading with Pimco California and Blackrock Muni

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

The idea behind Pimco California Municipal and Blackrock Muni Intermediate 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.