Correlation Between Pimco New and Blackrock Muniholdings

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

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

Diversification Opportunities for Pimco New and Blackrock Muniholdings

0.61

Correlation Coefficient

Pimco New  Blackrock Muniholdings

Poor diversification

The 3 months correlation between Pimco and Blackrock is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pimco New York and Blackrock Muniholdings Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniholdings and Pimco New 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 New York are associated (or correlated) with Blackrock Muniholdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniholdings has no effect on the direction of Pimco New i.e., Pimco New and Blackrock Muniholdings go up and down completely randomly.

Pair Corralation between Pimco New and Blackrock Muniholdings

Considering the 90-day investment horizon Pimco New is expected to generate 3.5 times less return on investment than Blackrock Muniholdings. But when comparing it to its historical volatility, Pimco New York is 1.01 times less risky than Blackrock Muniholdings. It trades about 0.03 of its potential returns per unit of risk. Blackrock Muniholdings Quality is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,032  in Blackrock Muniholdings Quality on September 2, 2024 and sell it today you would earn a total of  44.00  from holding Blackrock Muniholdings Quality or generate 4.26% return on investment over 90 days.

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

Pimco New York  vs.  Blackrock Muniholdings Quality

Pimco New York

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco New York are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Pimco New is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Blackrock Muniholdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniholdings Quality are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Blackrock Muniholdings 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 New and Blackrock Muniholdings

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

The idea behind Pimco New York and Blackrock Muniholdings Quality 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.