Correlation Between BlackRock California and Federated Premier

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Can any of the company-specific risk be diversified away by investing in both BlackRock California and Federated Premier 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 California and Federated Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlackRock California Municipal and Federated Premier Municipal, you can compare the effects of market volatilities on BlackRock California and Federated Premier 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 California with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock California and Federated Premier.

Diversification Opportunities for BlackRock California and Federated Premier

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between BlackRock and Federated is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock California Municipal and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and BlackRock California 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 California Municipal are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of BlackRock California i.e., BlackRock California and Federated Premier go up and down completely randomly.

Pair Corralation between BlackRock California and Federated Premier

Considering the 90-day investment horizon BlackRock California Municipal is expected to under-perform the Federated Premier. In addition to that, BlackRock California is 1.01 times more volatile than Federated Premier Municipal. It trades about -0.01 of its total potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.15 per unit of volatility. If you would invest  1,130  in Federated Premier Municipal on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Federated Premier Municipal or generate 1.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

BlackRock California Municipal  vs.  Federated Premier Municipal

 Performance 
       Timeline  
BlackRock California 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BlackRock California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BlackRock California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Federated Premier 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unsteady performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

BlackRock California and Federated Premier Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BlackRock California and Federated Premier

The main advantage of trading using opposite BlackRock California and Federated Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock California position performs unexpectedly, Federated Premier 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 Federated Premier will offset losses from the drop in Federated Premier's long position.
The idea behind BlackRock California Municipal and Federated Premier Municipal 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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