Correlation Between First Trust and Blackrock Muniyield

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

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

Diversification Opportunities for First Trust and Blackrock Muniyield

0.68

Correlation Coefficient

First Trust  Blackrock Muniyield

Poor diversification

The 3 months correlation between First and Blackrock is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Mortgage and Blackrock Muniyield Pennsylvan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniyield and First Trust 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 First Trust Mortgage 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 First Trust i.e., First Trust and Blackrock Muniyield go up and down completely randomly.

Pair Corralation between First Trust and Blackrock Muniyield

Considering the 90-day investment horizon First Trust Mortgage is expected to generate 1.29 times more return on investment than Blackrock Muniyield. However, First Trust is 1.29 times more volatile than Blackrock Muniyield Pennsylvania. It trades about 0.02 of its potential returns per unit of risk. Blackrock Muniyield Pennsylvania is currently generating about 0.02 per unit of risk. If you would invest  1,214  in First Trust Mortgage on September 12, 2024 and sell it today you would earn a total of  8.00  from holding First Trust Mortgage or generate 0.66% return on investment over 90 days.

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

First Trust Mortgage  vs.  Blackrock Muniyield Pennsylvan

First Trust Mortgage

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Mortgage are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Muniyield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniyield Pennsylvania are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Blackrock Muniyield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and Blackrock Muniyield

The main advantage of trading using opposite First Trust and Blackrock Muniyield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Mortgage and Blackrock Muniyield Pennsylvania 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.