Correlation Between Ishares Municipal and Intermediate-term
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Intermediate-term 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 Intermediate-term 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 Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on Ishares Municipal and Intermediate-term 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 Intermediate-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Intermediate-term.
Diversification Opportunities for Ishares Municipal and Intermediate-term
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ishares and Intermediate-term is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Intermediate-term go up and down completely randomly.
Pair Corralation between Ishares Municipal and Intermediate-term
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 1.23 times more return on investment than Intermediate-term. However, Ishares Municipal is 1.23 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.08 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.05 per unit of risk. If you would invest 1,104 in Ishares Municipal Bond on September 3, 2024 and sell it today you would earn a total of 13.00 from holding Ishares Municipal Bond or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Intermediate Term Tax Free Bon
Performance |
| Timeline |
| Ishares Municipal Bond |
| Intermediate Term Tax |
Ishares Municipal and Intermediate-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Intermediate-term
The main advantage of trading using opposite Ishares Municipal and Intermediate-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Intermediate-term 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 Intermediate-term will offset losses from the drop in Intermediate-term's long position.| Ishares Municipal vs. Vanguard Long Term Tax Exempt | Ishares Municipal vs. Vanguard High Yield Tax Exempt | Ishares Municipal vs. Franklin Federal Tax Free | Ishares Municipal vs. Franklin Federal Tax Free |
| Intermediate-term vs. Mesirow Financial Small | Intermediate-term vs. Goldman Sachs Financial | Intermediate-term vs. Royce Global Financial | Intermediate-term vs. Davis Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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