Correlation Between Bond Fund and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Bond Fund and Ishares 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 Bond Fund and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bond Fund Of and Ishares Municipal Bond, you can compare the effects of market volatilities on Bond Fund and Ishares 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 Bond Fund with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bond Fund and Ishares Municipal.
Diversification Opportunities for Bond Fund and Ishares Municipal
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bond and Ishares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bond Fund Of and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond and Bond Fund 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 Bond Fund Of are associated (or correlated) with Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Bond Fund i.e., Bond Fund and Ishares Municipal go up and down completely randomly.
Pair Corralation between Bond Fund and Ishares Municipal
Assuming the 90 days horizon Bond Fund Of is expected to under-perform the Ishares Municipal. But the mutual fund apears to be less risky and, when comparing its historical volatility, Bond Fund Of is 1.02 times less risky than Ishares Municipal. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Ishares Municipal Bond is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,100 in Ishares Municipal Bond on August 26, 2024 and sell it today you would earn a total of 8.00 from holding Ishares Municipal Bond or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bond Fund Of vs. Ishares Municipal Bond
Performance |
| Timeline |
| Bond Fund |
| Ishares Municipal Bond |
Bond Fund and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bond Fund and Ishares Municipal
The main advantage of trading using opposite Bond Fund and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bond Fund position performs unexpectedly, Ishares 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 Ishares Municipal will offset losses from the drop in Ishares Municipal's long position.| Bond Fund vs. Transamerica Intermediate Muni | Bond Fund vs. T Rowe Price | Bond Fund vs. Counterpoint Tactical Municipal | Bond Fund vs. T Rowe Price |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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