Correlation Between High-yield Municipal and IShares Gold
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and IShares Gold 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 High-yield Municipal and IShares Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and iShares Gold Trust, you can compare the effects of market volatilities on High-yield Municipal and IShares Gold 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 High-yield Municipal with a short position of IShares Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and IShares Gold.
Diversification Opportunities for High-yield Municipal and IShares Gold
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between High-yield and IShares is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and iShares Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Gold Trust and High-yield 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 High Yield Municipal Fund are associated (or correlated) with IShares Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Gold Trust has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and IShares Gold go up and down completely randomly.
Pair Corralation between High-yield Municipal and IShares Gold
Assuming the 90 days horizon High-yield Municipal is expected to generate 4.35 times less return on investment than IShares Gold. But when comparing it to its historical volatility, High Yield Municipal Fund is 3.07 times less risky than IShares Gold. It trades about 0.08 of its potential returns per unit of risk. iShares Gold Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,823 in iShares Gold Trust on November 19, 2024 and sell it today you would earn a total of 1,057 from holding iShares Gold Trust or generate 57.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
High Yield Municipal Fund vs. iShares Gold Trust
Performance |
| Timeline |
| High Yield Municipal |
| iShares Gold Trust |
High-yield Municipal and IShares Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and IShares Gold
The main advantage of trading using opposite High-yield Municipal and IShares Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, IShares Gold 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 IShares Gold will offset losses from the drop in IShares Gold's long position.| High-yield Municipal vs. High Yield Fund Investor | High-yield Municipal vs. Intermediate Term Tax Free Bond | High-yield Municipal vs. California High Yield Municipal | High-yield Municipal vs. T Rowe Price |
| IShares Gold vs. SPDR Gold MiniShares | IShares Gold vs. Goldman Sachs Physical | IShares Gold vs. GraniteShares Gold Trust | IShares Gold vs. VanEck Merk Gold |
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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