Correlation Between Pimco California and Blackrock Muniyield

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

Diversification Opportunities for Pimco California and Blackrock Muniyield

0.9

Correlation Coefficient

Pimco California  Blackrock Muniyield

Almost no diversification

The 3 months correlation between PIMCO and Blackrock is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pimco California Municipal and Blackrock Muniyield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniyield 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 Muniyield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniyield has no effect on the direction of Pimco California i.e., Pimco California and Blackrock Muniyield go up and down completely randomly.

Pair Corralation between Pimco California and Blackrock Muniyield

Considering the 90-day investment horizon Pimco California Municipal is expected to generate 1.11 times more return on investment than Blackrock Muniyield. However, Pimco California is 1.11 times more volatile than Blackrock Muniyield. It trades about -0.07 of its potential returns per unit of risk. Blackrock Muniyield is currently generating about -0.1 per unit of risk. If you would invest  960.00  in Pimco California Municipal on November 29, 2024 and sell it today you would lose (32.00) from holding Pimco California Municipal or give up 3.33% of portfolio value over 90 days.

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

Pimco California Municipal  vs.  Blackrock Muniyield

Pimco California Mun

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pimco California Municipal has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable fundamental indicators, Pimco California is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Pimco California and Blackrock Muniyield

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

The idea behind Pimco California Municipal and Blackrock Muniyield 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.