Correlation Between Blackrock Enhanced and Federated Premier

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

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

Diversification Opportunities for Blackrock Enhanced and Federated Premier

-0.8

Correlation Coefficient

Blackrock Enhanced  Federated Premier

Pay attention - limited upside

The 3 months correlation between Blackrock and Federated is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Enhanced Equity and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and Blackrock Enhanced 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 Enhanced Equity are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Blackrock Enhanced i.e., Blackrock Enhanced and Federated Premier go up and down completely randomly.

Pair Corralation between Blackrock Enhanced and Federated Premier

Considering the 90-day investment horizon Blackrock Enhanced Equity is expected to generate 1.24 times more return on investment than Federated Premier. However, Blackrock Enhanced is 1.24 times more volatile than Federated Premier Municipal. It trades about 0.06 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.06 per unit of risk. If you would invest  741.00  in Blackrock Enhanced Equity on September 12, 2024 and sell it today you would earn a total of  132.00  from holding Blackrock Enhanced Equity or generate 17.81% return on investment over 90 days.

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

Blackrock Enhanced Equity  vs.  Federated Premier Municipal

Blackrock Enhanced Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Enhanced Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively steady fundamental indicators, Blackrock Enhanced is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Blackrock Enhanced and Federated Premier

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

The idea behind Blackrock Enhanced Equity and Federated Premier Municipal 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.