Correlation Between Blackrock National and Causeway Emerging

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

By analyzing existing cross correlation between Blackrock National Municipal and Causeway Emerging Markets, you can compare the effects of market volatilities on Blackrock National and Causeway Emerging 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 National with a short position of Causeway Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackrock National and Causeway Emerging.

Diversification Opportunities for Blackrock National and Causeway Emerging

0.79

Correlation Coefficient

Blackrock National  Causeway Emerging

Poor diversification

The 1 month correlation between Blackrock and Causeway is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Blackrock National Municipal and Causeway Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway Emerging Markets and Blackrock National 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 National Municipal are associated (or correlated) with Causeway Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway Emerging Markets has no effect on the direction of Blackrock National i.e., Blackrock National and Causeway Emerging go up and down completely randomly.

Pair Corralation between Blackrock National and Causeway Emerging

Assuming the 90 days horizon Blackrock National is expected to generate 12.87 times less return on investment than Causeway Emerging. But when comparing it to its historical volatility, Blackrock National Municipal is 6.62 times less risky than Causeway Emerging. It trades about 0.27 of its potential returns per unit of risk. Causeway Emerging Markets is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest  1,065  in Causeway Emerging Markets on February 21, 2024 and sell it today you would earn a total of  99.00  from holding Causeway Emerging Markets or generate 9.3% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Blackrock National Municipal  vs.  Causeway Emerging Markets

Blackrock National

Risk-Adjusted Performance

21 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock National Municipal are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Blackrock National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Causeway Emerging Markets

Risk-Adjusted Performance

40 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Causeway Emerging Markets are ranked lower than 40 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Causeway Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackrock National and Causeway Emerging

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

The idea behind Blackrock National Municipal and Causeway Emerging Markets 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.