Correlation Between High-yield Municipal and IShares Preferred
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and IShares Preferred 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 Preferred 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 Preferred and, you can compare the effects of market volatilities on High-yield Municipal and IShares Preferred 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 Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and IShares Preferred.
Diversification Opportunities for High-yield Municipal and IShares Preferred
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between High-yield and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and iShares Preferred and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Preferred 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 Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Preferred has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and IShares Preferred go up and down completely randomly.
Pair Corralation between High-yield Municipal and IShares Preferred
Assuming the 90 days horizon High-yield Municipal is expected to generate 1.27 times less return on investment than IShares Preferred. But when comparing it to its historical volatility, High Yield Municipal Fund is 1.91 times less risky than IShares Preferred. It trades about 0.16 of its potential returns per unit of risk. iShares Preferred and is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,763 in iShares Preferred and on August 25, 2024 and sell it today you would earn a total of 507.00 from holding iShares Preferred and or generate 18.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. iShares Preferred and
Performance |
| Timeline |
| High Yield Municipal |
| iShares Preferred |
High-yield Municipal and IShares Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and IShares Preferred
The main advantage of trading using opposite High-yield Municipal and IShares Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, IShares Preferred 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 Preferred will offset losses from the drop in IShares Preferred's long position.| High-yield Municipal vs. Munivest Fund | High-yield Municipal vs. Blackrock Muniholdings Quality | High-yield Municipal vs. DWS Municipal Income | High-yield Municipal vs. Blackrock Muniholdings Closed |
| IShares Preferred vs. ETF Series Solutions | IShares Preferred vs. Aquagold International | IShares Preferred vs. Morningstar Unconstrained Allocation | IShares Preferred vs. High Yield Municipal Fund |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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