Correlation Between Blackrock Natl and Vanguard Intermediate

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

By analyzing existing cross correlation between Blackrock Natl Muni and Vanguard Intermediate Term Tax Exempt, you can compare the effects of market volatilities on Blackrock Natl and Vanguard Intermediate 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 Natl with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock Natl and Vanguard Intermediate.

Diversification Opportunities for Blackrock Natl and Vanguard Intermediate

0.99

Correlation Coefficient

Blackrock Natl  Vanguard Intermediate

No risk reduction

The 3 months correlation between Blackrock and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock Natl Muni and Vanguard Intermediate Term Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Blackrock Natl 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 Natl Muni are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Blackrock Natl i.e., Blackrock Natl and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Blackrock Natl and Vanguard Intermediate

Assuming the 90 days horizon Blackrock Natl Muni is expected to generate 0.86 times more return on investment than Vanguard Intermediate. However, Blackrock Natl Muni is 1.17 times less risky than Vanguard Intermediate. It trades about -0.43 of its potential returns per unit of risk. Vanguard Intermediate Term Tax Exempt is currently generating about -0.4 per unit of risk. If you would invest  1,014  in Blackrock Natl Muni on January 29, 2024 and sell it today you would lose (11.00) from holding Blackrock Natl Muni or give up 1.08% of portfolio value over 90 days.

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

Blackrock Natl Muni  vs.  Vanguard Intermediate Term Tax

Blackrock Natl Muni

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blackrock Natl and Vanguard Intermediate

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

The idea behind Blackrock Natl Muni and Vanguard Intermediate Term Tax Exempt 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.