Correlation Between Ishares Municipal and Precious Metals
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Precious Metals 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 Precious Metals 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 Precious Metals Ultrasector, you can compare the effects of market volatilities on Ishares Municipal and Precious Metals 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 Precious Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Precious Metals.
Diversification Opportunities for Ishares Municipal and Precious Metals
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ishares and Precious is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Precious Metals Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals Ultr 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals Ultr has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Precious Metals go up and down completely randomly.
Pair Corralation between Ishares Municipal and Precious Metals
Assuming the 90 days horizon Ishares Municipal is expected to generate 7.75 times less return on investment than Precious Metals. But when comparing it to its historical volatility, Ishares Municipal Bond is 23.58 times less risky than Precious Metals. It trades about 0.48 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,228 in Precious Metals Ultrasector on September 12, 2024 and sell it today you would earn a total of 476.00 from holding Precious Metals Ultrasector or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Precious Metals Ultrasector
Performance |
| Timeline |
| Ishares Municipal Bond |
| Precious Metals Ultr |
Ishares Municipal and Precious Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Precious Metals
The main advantage of trading using opposite Ishares Municipal and Precious Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Precious Metals 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 Precious Metals will offset losses from the drop in Precious Metals' long position.| Ishares Municipal vs. Western Asset Municipal | Ishares Municipal vs. Multisector Bond Sma | Ishares Municipal vs. Ambrus Core Bond | Ishares Municipal vs. Pace High Yield |
| Precious Metals vs. Lord Abbett Government | Precious Metals vs. Franklin Adjustable Government | Precious Metals vs. Sit Government Securities | Precious Metals vs. Dunham Porategovernment Bond |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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