Correlation Between Blackrock Muniholdings and Madison Covered

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

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

Diversification Opportunities for Blackrock Muniholdings and Madison Covered

0.63

Correlation Coefficient

Blackrock Muniholdings  Madison Covered

Poor diversification

The 3 months correlation between Blackrock and Madison is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniholdings Closed and Madison Covered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Covered Call and Blackrock Muniholdings 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 Muniholdings Closed are associated (or correlated) with Madison Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Covered Call has no effect on the direction of Blackrock Muniholdings i.e., Blackrock Muniholdings and Madison Covered go up and down completely randomly.

Pair Corralation between Blackrock Muniholdings and Madison Covered

Considering the 90-day investment horizon Blackrock Muniholdings Closed is expected to generate 1.03 times more return on investment than Madison Covered. However, Blackrock Muniholdings is 1.03 times more volatile than Madison Covered Call. It trades about 0.07 of its potential returns per unit of risk. Madison Covered Call is currently generating about 0.0 per unit of risk. If you would invest  1,223  in Blackrock Muniholdings Closed on September 2, 2024 and sell it today you would earn a total of  36.00  from holding Blackrock Muniholdings Closed or generate 2.94% return on investment over 90 days.

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

Blackrock Muniholdings Closed  vs.  Madison Covered Call

Blackrock Muniholdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniholdings Closed are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical indicators, Blackrock Muniholdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Madison Covered Call

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blackrock Muniholdings and Madison Covered

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

The idea behind Blackrock Muniholdings Closed and Madison Covered Call 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.