Correlation Between First Trust and BlackRock Municipal
Can any of the company-specific risk be diversified away by investing in both First Trust and BlackRock Municipal 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 First Trust and BlackRock Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Senior and BlackRock Municipal Income, you can compare the effects of market volatilities on First Trust and BlackRock Municipal 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 First Trust with a short position of BlackRock Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BlackRock Municipal.
Diversification Opportunities for First Trust and BlackRock Municipal
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and BlackRock is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and BlackRock Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Municipal and First Trust 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 First Trust Senior are associated (or correlated) with BlackRock Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Municipal has no effect on the direction of First Trust i.e., First Trust and BlackRock Municipal go up and down completely randomly.
Pair Corralation between First Trust and BlackRock Municipal
Considering the 90-day investment horizon First Trust Senior is expected to generate 0.92 times more return on investment than BlackRock Municipal. However, First Trust Senior is 1.09 times less risky than BlackRock Municipal. It trades about 0.11 of its potential returns per unit of risk. BlackRock Municipal Income is currently generating about 0.05 per unit of risk. If you would invest 807.00 in First Trust Senior on August 31, 2024 and sell it today you would earn a total of 234.00 from holding First Trust Senior or generate 29.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Senior vs. BlackRock Municipal Income
Performance |
| Timeline |
| First Trust Senior |
| BlackRock Municipal |
First Trust and BlackRock Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and BlackRock Municipal
The main advantage of trading using opposite First Trust and BlackRock Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BlackRock Municipal 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 Municipal will offset losses from the drop in BlackRock Municipal's long position.| First Trust vs. Eaton Vance National | First Trust vs. Invesco High Income | First Trust vs. Blackrock Muniholdings Ny | First Trust vs. Nuveen California Select |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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