Correlation Between Central Securities and Blackrock Muniyield

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

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

Diversification Opportunities for Central Securities and Blackrock Muniyield

-0.11

Correlation Coefficient

Central Securities  Blackrock Muniyield

Good diversification

The 3 months correlation between Central and Blackrock is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities and Blackrock Muniyield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniyield and Central Securities 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 Central Securities 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 Central Securities i.e., Central Securities and Blackrock Muniyield go up and down completely randomly.

Pair Corralation between Central Securities and Blackrock Muniyield

Considering the 90-day investment horizon Central Securities is expected to generate 1.02 times more return on investment than Blackrock Muniyield. However, Central Securities is 1.02 times more volatile than Blackrock Muniyield. It trades about 0.26 of its potential returns per unit of risk. Blackrock Muniyield is currently generating about 0.06 per unit of risk. If you would invest  4,246  in Central Securities on September 5, 2024 and sell it today you would earn a total of  503.00  from holding Central Securities or generate 11.85% return on investment over 90 days.

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

Central Securities  vs.  Blackrock Muniyield

Central Securities

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Securities are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Central Securities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blackrock Muniyield

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniyield are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Blackrock Muniyield is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Central Securities and Blackrock Muniyield

The main advantage of trading using opposite Central Securities and Blackrock Muniyield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Securities 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 Central Securities and Blackrock Muniyield 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.