Correlation Between Blackrock Muniyield and MFS High

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

Diversification Opportunities for Blackrock Muniyield and MFS High

0.94

Correlation Coefficient

Blackrock Muniyield  MFS High

Almost no diversification

The 3 months correlation between Blackrock and MFS is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Muniyield Quality and MFS High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High 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 MFS High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS High Income has no effect on the direction of Blackrock Muniyield i.e., Blackrock Muniyield and MFS High go up and down completely randomly.

Pair Corralation between Blackrock Muniyield and MFS High

Considering the 90-day investment horizon Blackrock Muniyield is expected to generate 1.57 times less return on investment than MFS High. But when comparing it to its historical volatility, Blackrock Muniyield Quality is 1.25 times less risky than MFS High. It trades about 0.0 of its potential returns per unit of risk. MFS High Income is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  378.00  in MFS High Income on August 21, 2024 and sell it today you would earn a total of  0.00  from holding MFS High Income or generate 0.0% return on investment over 90 days.

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

Blackrock Muniyield Quality  vs.  MFS High Income

Blackrock Muniyield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackrock Muniyield Quality has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock Muniyield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blackrock Muniyield and MFS High

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

The idea behind Blackrock Muniyield Quality and MFS High 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.