Correlation Between Tax Exempt and Blackrock National

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

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

Diversification Opportunities for Tax Exempt and Blackrock National

0.98

Correlation Coefficient

Tax Exempt  Blackrock National

Almost no diversification

The 3 months correlation between Tax and Blackrock is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond and Blackrock National Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock National and Tax Exempt 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 Tax Exempt Bond are associated (or correlated) with Blackrock National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock National has no effect on the direction of Tax Exempt i.e., Tax Exempt and Blackrock National go up and down completely randomly.

Pair Corralation between Tax Exempt and Blackrock National

Assuming the 90 days horizon Tax Exempt Bond is expected to generate 1.1 times more return on investment than Blackrock National. However, Tax Exempt is 1.1 times more volatile than Blackrock National Municipal. It trades about 0.07 of its potential returns per unit of risk. Blackrock National Municipal is currently generating about 0.06 per unit of risk. If you would invest  1,245  in Tax Exempt Bond on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Tax Exempt Bond or generate 1.04% return on investment over 90 days.

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

Tax Exempt Bond  vs.  Blackrock National Municipal

Tax Exempt Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Exempt Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Tax Exempt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock National Municipal are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Blackrock National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax Exempt and Blackrock National

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

The idea behind Tax Exempt Bond and Blackrock National 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.