Correlation Between Ishares Municipal and Hennessy
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Hennessy 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 Ishares Municipal and Hennessy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ishares Municipal Bond and Hennessy Bp Energy, you can compare the effects of market volatilities on Ishares Municipal and Hennessy 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 Ishares Municipal with a short position of Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Hennessy.
Diversification Opportunities for Ishares Municipal and Hennessy
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ishares and Hennessy is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy and Ishares 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 Ishares Municipal Bond are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Hennessy go up and down completely randomly.
Pair Corralation between Ishares Municipal and Hennessy
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 0.18 times more return on investment than Hennessy. However, Ishares Municipal Bond is 5.67 times less risky than Hennessy. It trades about 0.02 of its potential returns per unit of risk. Hennessy Bp Energy is currently generating about -0.04 per unit of risk. If you would invest 1,106 in Ishares Municipal Bond on September 15, 2024 and sell it today you would earn a total of 1.00 from holding Ishares Municipal Bond or generate 0.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Hennessy Bp Energy
Performance |
| Timeline |
| Ishares Municipal Bond |
| Hennessy Bp Energy |
Ishares Municipal and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Hennessy
The main advantage of trading using opposite Ishares Municipal and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Hennessy 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 Hennessy will offset losses from the drop in Hennessy's long position.| Ishares Municipal vs. Blackrock California Municipal | Ishares Municipal vs. Blackrock Balanced Capital | Ishares Municipal vs. Blackrock Eurofund Class | Ishares Municipal vs. Blackrock Funds |
| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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