Correlation Between Income Fund and Blackrock Muniholdings

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

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

Diversification Opportunities for Income Fund and Blackrock Muniholdings

0.71

Correlation Coefficient

Income Fund  Blackrock Muniholdings

Poor diversification

The 3 months correlation between INCOME and Blackrock is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and Blackrock Muniholdings Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Muniholdings and Income Fund 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 Income Fund Of 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 Income Fund i.e., Income Fund and Blackrock Muniholdings go up and down completely randomly.

Pair Corralation between Income Fund and Blackrock Muniholdings

Assuming the 90 days horizon Income Fund Of is expected to generate 1.03 times more return on investment than Blackrock Muniholdings. However, Income Fund is 1.03 times more volatile than Blackrock Muniholdings Quality. It trades about 0.02 of its potential returns per unit of risk. Blackrock Muniholdings Quality is currently generating about -0.06 per unit of risk. If you would invest  2,403  in Income Fund Of on January 13, 2025 and sell it today you would earn a total of  23.00  from holding Income Fund Of or generate 0.96% return on investment over 90 days.

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

Income Fund Of  vs.  Blackrock Muniholdings Quality

Income Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Income Fund Of are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Income Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Muniholdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Muniholdings Quality has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Income Fund and Blackrock Muniholdings

The main advantage of trading using opposite Income Fund and Blackrock Muniholdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund 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 Income Fund Of and Blackrock Muniholdings Quality 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..