Correlation Between BlackRock Municipal and MFS High
Can any of the company-specific risk be diversified away by investing in both BlackRock Municipal 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 Municipal 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 Municipal Income and MFS High Yield, you can compare the effects of market volatilities on BlackRock Municipal 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 Municipal with a short position of MFS High. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Municipal and MFS High.
Diversification Opportunities for BlackRock Municipal and MFS High
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BlackRock and MFS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Municipal Income and MFS High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High Yield and BlackRock Municipal 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 Municipal Income 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 Yield has no effect on the direction of BlackRock Municipal i.e., BlackRock Municipal and MFS High go up and down completely randomly.
Pair Corralation between BlackRock Municipal and MFS High
Considering the 90-day investment horizon BlackRock Municipal Income is expected to generate 0.97 times more return on investment than MFS High. However, BlackRock Municipal Income is 1.03 times less risky than MFS High. It trades about 0.36 of its potential returns per unit of risk. MFS High Yield is currently generating about 0.12 per unit of risk. If you would invest 977.00 in BlackRock Municipal Income on October 24, 2024 and sell it today you would earn a total of 32.00 from holding BlackRock Municipal Income or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlackRock Municipal Income vs. MFS High Yield
Performance |
| Timeline |
| BlackRock Municipal |
| MFS High Yield |
BlackRock Municipal and MFS High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlackRock Municipal and MFS High
The main advantage of trading using opposite BlackRock Municipal and MFS High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock Municipal 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 Municipal Income and MFS High Yield 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.
| MFS High vs. MFS Investment Grade | MFS High vs. MFS Municipal Income | MFS High vs. DTF Tax Free | MFS High vs. MFS Government Markets |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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