Correlation Between BlackRock Municipal and Blackrock Muniyield

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

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

Diversification Opportunities for BlackRock Municipal and Blackrock Muniyield

0.91

Correlation Coefficient

BlackRock Municipal  Blackrock Muniyield

Almost no diversification

The 3 months correlation between BlackRock and Blackrock is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Municipal Income and Blackrock Muniyield Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniyield and BlackRock Municipal 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 BlackRock Municipal Income 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 BlackRock Municipal i.e., BlackRock Municipal and Blackrock Muniyield go up and down completely randomly.

Pair Corralation between BlackRock Municipal and Blackrock Muniyield

Considering the 90-day investment horizon BlackRock Municipal is expected to generate 1.37 times less return on investment than Blackrock Muniyield. In addition to that, BlackRock Municipal is 1.18 times more volatile than Blackrock Muniyield Quality. It trades about 0.03 of its total potential returns per unit of risk. Blackrock Muniyield Quality is currently generating about 0.05 per unit of volatility. If you would invest  1,067  in Blackrock Muniyield Quality on September 3, 2024 and sell it today you would earn a total of  208.00  from holding Blackrock Muniyield Quality or generate 19.49% return on investment over 90 days.

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

BlackRock Municipal Income  vs.  Blackrock Muniyield Quality

BlackRock Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BlackRock Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Blackrock Muniyield

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with BlackRock Municipal and Blackrock Muniyield

The main advantage of trading using opposite BlackRock Municipal and Blackrock Muniyield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock Municipal 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 BlackRock Municipal Income and Blackrock Muniyield 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.