Correlation Between High-yield Municipal and IShares Core
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and IShares Core 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 Core 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 Core SP, you can compare the effects of market volatilities on High-yield Municipal and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and IShares Core.
Diversification Opportunities for High-yield Municipal and IShares Core
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between High-yield and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and IShares Core go up and down completely randomly.
Pair Corralation between High-yield Municipal and IShares Core
Assuming the 90 days horizon High-yield Municipal is expected to generate 1.89 times less return on investment than IShares Core. But when comparing it to its historical volatility, High Yield Municipal Fund is 4.29 times less risky than IShares Core. It trades about 0.08 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,887 in iShares Core SP on November 19, 2024 and sell it today you would earn a total of 1,822 from holding iShares Core SP or generate 18.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
High Yield Municipal Fund vs. iShares Core SP
Performance |
| Timeline |
| High Yield Municipal |
| iShares Core SP |
High-yield Municipal and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and IShares Core
The main advantage of trading using opposite High-yield Municipal and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core'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 Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP Small Cap | IShares Core vs. iShares SP 500 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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