Correlation Between Blackrock Muniholdings and Invesco California

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

By analyzing existing cross correlation between Blackrock Muniholdings Quality and Invesco California Value, you can compare the effects of market volatilities on Blackrock Muniholdings and Invesco California 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 Invesco California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Muniholdings and Invesco California.

Diversification Opportunities for Blackrock Muniholdings and Invesco California

0.48

Correlation Coefficient

Blackrock Muniholdings  Invesco California

Very weak diversification

The 3 months correlation between Blackrock and Invesco is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniholdings Quality and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value 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 Quality are associated (or correlated) with Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of Blackrock Muniholdings i.e., Blackrock Muniholdings and Invesco California go up and down completely randomly.

Pair Corralation between Blackrock Muniholdings and Invesco California

Considering the 90-day investment horizon Blackrock Muniholdings Quality is expected to generate 0.75 times more return on investment than Invesco California. However, Blackrock Muniholdings Quality is 1.34 times less risky than Invesco California. It trades about 0.12 of its potential returns per unit of risk. Invesco California Value is currently generating about -0.02 per unit of risk. If you would invest  1,032  in Blackrock Muniholdings Quality on September 3, 2024 and sell it today you would earn a total of  44.00  from holding Blackrock Muniholdings Quality or generate 4.26% return on investment over 90 days.

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

Blackrock Muniholdings Quality  vs.  Invesco California Value

Blackrock Muniholdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniholdings Quality are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Blackrock Muniholdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco California Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Blackrock Muniholdings and Invesco California

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

The idea behind Blackrock Muniholdings Quality and Invesco California Value 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.