Correlation Between Dreyfus Strategic and Blackrock Muniassets

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

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

Diversification Opportunities for Dreyfus Strategic and Blackrock Muniassets

0.88

Correlation Coefficient

Dreyfus Strategic  Blackrock Muniassets

Very poor diversification

The 3 months correlation between Dreyfus and Blackrock is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Strategic Municipal and Blackrock Muniassets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniassets and Dreyfus Strategic 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 Dreyfus Strategic Municipal are associated (or correlated) with Blackrock Muniassets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniassets has no effect on the direction of Dreyfus Strategic i.e., Dreyfus Strategic and Blackrock Muniassets go up and down completely randomly.

Pair Corralation between Dreyfus Strategic and Blackrock Muniassets

Assuming the 90 days horizon Dreyfus Strategic Municipal is expected to under-perform the Blackrock Muniassets. In addition to that, Dreyfus Strategic is 1.15 times more volatile than Blackrock Muniassets. It trades about -0.13 of its total potential returns per unit of risk. Blackrock Muniassets is currently generating about -0.06 per unit of volatility. If you would invest  1,156  in Blackrock Muniassets on December 30, 2024 and sell it today you would lose (18.00) from holding Blackrock Muniassets or give up 1.56% of portfolio value over 90 days.

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

Dreyfus Strategic Municipal  vs.  Blackrock Muniassets

Dreyfus Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Strategic Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Dreyfus Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Muniassets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Muniassets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Muniassets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dreyfus Strategic and Blackrock Muniassets

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

The idea behind Dreyfus Strategic Municipal and Blackrock Muniassets 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.