Correlation Between Blackrock Muniyield and Pimco Municipal

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

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

Diversification Opportunities for Blackrock Muniyield and Pimco Municipal

0.78

Correlation Coefficient

Blackrock Muniyield  Pimco Municipal

Poor diversification

The 3 months correlation between Blackrock and Pimco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniyield Quality and Pimco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Municipal Income and Blackrock Muniyield 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 Muniyield Quality are associated (or correlated) with Pimco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Municipal Income has no effect on the direction of Blackrock Muniyield i.e., Blackrock Muniyield and Pimco Municipal go up and down completely randomly.

Pair Corralation between Blackrock Muniyield and Pimco Municipal

Considering the 90-day investment horizon Blackrock Muniyield Quality is expected to generate 0.57 times more return on investment than Pimco Municipal. However, Blackrock Muniyield Quality is 1.76 times less risky than Pimco Municipal. It trades about 0.25 of its potential returns per unit of risk. Pimco Municipal Income is currently generating about 0.02 per unit of risk. If you would invest  1,117  in Blackrock Muniyield Quality on September 4, 2024 and sell it today you would earn a total of  39.00  from holding Blackrock Muniyield Quality or generate 3.49% return on investment over 90 days.

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

Blackrock Muniyield Quality  vs.  Pimco Municipal Income

Blackrock Muniyield

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniyield Quality are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Blackrock Muniyield is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pimco Municipal Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Municipal Income are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent primary indicators, Pimco Municipal is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Blackrock Muniyield and Pimco Municipal

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

The idea behind Blackrock Muniyield Quality and Pimco Municipal Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.