Correlation Between State Street and Blackrock Taxable

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

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

Diversification Opportunities for State Street and Blackrock Taxable

0.09

Correlation Coefficient

State Street  Blackrock Taxable

Significant diversification

The 3 months correlation between State and Blackrock is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and Blackrock Taxable Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Taxable and State Street 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 State Street Premier are associated (or correlated) with Blackrock Taxable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Taxable has no effect on the direction of State Street i.e., State Street and Blackrock Taxable go up and down completely randomly.

Pair Corralation between State Street and Blackrock Taxable

Assuming the 90 days horizon State Street Premier is expected to under-perform the Blackrock Taxable. In addition to that, State Street is 4.32 times more volatile than Blackrock Taxable Municipal. It trades about -0.12 of its total potential returns per unit of risk. Blackrock Taxable Municipal is currently generating about 0.01 per unit of volatility. If you would invest  1,684  in Blackrock Taxable Municipal on December 1, 2024 and sell it today you would earn a total of  8.00  from holding Blackrock Taxable Municipal or generate 0.48% return on investment over 90 days.

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

State Street Premier  vs.  Blackrock Taxable Municipal

State Street Premier

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Premier has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Blackrock Taxable

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Taxable Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy fundamental drivers, Blackrock Taxable is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with State Street and Blackrock Taxable

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

The idea behind State Street Premier and Blackrock Taxable Municipal 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.