Correlation Between IShares BBB and BlackRock Intermediate

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

By analyzing existing cross correlation between iShares BBB Rated and BlackRock Intermediate Muni, you can compare the effects of market volatilities on IShares BBB and BlackRock Intermediate 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 IShares BBB with a short position of BlackRock Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares BBB and BlackRock Intermediate.

Diversification Opportunities for IShares BBB and BlackRock Intermediate

0.85

Correlation Coefficient

IShares BBB  BlackRock Intermediate

Very poor diversification

The 3 months correlation between IShares and BlackRock is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares BBB Rated and BlackRock Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Intermediate and IShares BBB 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 iShares BBB Rated are associated (or correlated) with BlackRock Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Intermediate has no effect on the direction of IShares BBB i.e., IShares BBB and BlackRock Intermediate go up and down completely randomly.

Pair Corralation between IShares BBB and BlackRock Intermediate

Given the investment horizon of 90 days iShares BBB Rated is expected to generate 1.39 times more return on investment than BlackRock Intermediate. However, IShares BBB is 1.39 times more volatile than BlackRock Intermediate Muni. It trades about 0.03 of its potential returns per unit of risk. BlackRock Intermediate Muni is currently generating about 0.03 per unit of risk. If you would invest  8,658  in iShares BBB Rated on September 3, 2024 and sell it today you would earn a total of  57.00  from holding iShares BBB Rated or generate 0.66% return on investment over 90 days.

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

iShares BBB Rated  vs.  BlackRock Intermediate Muni

iShares BBB Rated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares BBB Rated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IShares BBB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BlackRock Intermediate

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Intermediate Muni are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, BlackRock Intermediate is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares BBB and BlackRock Intermediate

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

The idea behind iShares BBB Rated and BlackRock Intermediate Muni 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.