Correlation Between General American and Blackrock Muniholdings

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Can any of the company-specific risk be diversified away by investing in both General American and Blackrock Muniholdings 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 General American and Blackrock Muniholdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General American Investors and Blackrock Muniholdings Closed, you can compare the effects of market volatilities on General American and Blackrock Muniholdings 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 General American with a short position of Blackrock Muniholdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and Blackrock Muniholdings.

Diversification Opportunities for General American and Blackrock Muniholdings

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Blackrock is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Blackrock Muniholdings Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniholdings and General American 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 General American Investors are associated (or correlated) with Blackrock Muniholdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniholdings has no effect on the direction of General American i.e., General American and Blackrock Muniholdings go up and down completely randomly.

Pair Corralation between General American and Blackrock Muniholdings

Considering the 90-day investment horizon General American Investors is expected to generate 1.75 times more return on investment than Blackrock Muniholdings. However, General American is 1.75 times more volatile than Blackrock Muniholdings Closed. It trades about 0.09 of its potential returns per unit of risk. Blackrock Muniholdings Closed is currently generating about 0.06 per unit of risk. If you would invest  3,222  in General American Investors on August 5, 2024 and sell it today you would earn a total of  2,054  from holding General American Investors or generate 63.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General American Investors  vs.  Blackrock Muniholdings Closed

 Performance 
       Timeline  
General American Inv 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in General American Investors are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, General American may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Blackrock Muniholdings 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Muniholdings Closed are ranked lower than 3 (%) 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.

General American and Blackrock Muniholdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General American and Blackrock Muniholdings

The main advantage of trading using opposite General American and Blackrock Muniholdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American position performs unexpectedly, Blackrock Muniholdings 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 Muniholdings will offset losses from the drop in Blackrock Muniholdings' long position.
The idea behind General American Investors and Blackrock Muniholdings Closed 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 Stocks Directory module to find actively traded stocks across global markets.

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