Correlation Between General American and Blackrock Muniyield

Can any of the company-specific risk be diversified away by investing in both General American and Blackrock Muniyield 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 Muniyield 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 Muniyield, you can compare the effects of market volatilities on General American and Blackrock Muniyield 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 Muniyield. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and Blackrock Muniyield.

Diversification Opportunities for General American and Blackrock Muniyield

0.53

Correlation Coefficient

General American  Blackrock Muniyield

Very weak diversification

The 3 months correlation between General and Blackrock is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Blackrock Muniyield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniyield 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 Muniyield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Muniyield has no effect on the direction of General American i.e., General American and Blackrock Muniyield go up and down completely randomly.

Pair Corralation between General American and Blackrock Muniyield

Considering the 90-day investment horizon General American Investors is expected to generate 1.22 times more return on investment than Blackrock Muniyield. However, General American is 1.22 times more volatile than Blackrock Muniyield. It trades about 0.19 of its potential returns per unit of risk. Blackrock Muniyield is currently generating about 0.07 per unit of risk. If you would invest  5,030  in General American Investors on August 12, 2024 and sell it today you would earn a total of  475.00  from holding General American Investors or generate 9.44% return on investment over 90 days.

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

General American Investors  vs.  Blackrock Muniyield

General American Inv

Risk-Adjusted Performance

15 of 100

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 Muniyield

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with General American and Blackrock Muniyield

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

The idea behind General American Investors and Blackrock Muniyield 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.