Correlation Between Ishares Municipal and Vanguard Global
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Vanguard Global 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 Vanguard Global 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 Vanguard Global Credit, you can compare the effects of market volatilities on Ishares Municipal and Vanguard Global 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 Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Vanguard Global.
Diversification Opportunities for Ishares Municipal and Vanguard Global
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ishares and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Vanguard Global Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Credit 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 Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Credit has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Vanguard Global go up and down completely randomly.
Pair Corralation between Ishares Municipal and Vanguard Global
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 0.52 times more return on investment than Vanguard Global. However, Ishares Municipal Bond is 1.93 times less risky than Vanguard Global. It trades about 0.48 of its potential returns per unit of risk. Vanguard Global Credit is currently generating about 0.23 per unit of risk. If you would invest 1,106 in Ishares Municipal Bond on September 12, 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Vanguard Global Credit
Performance |
| Timeline |
| Ishares Municipal Bond |
| Vanguard Global Credit |
Ishares Municipal and Vanguard Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Vanguard Global
The main advantage of trading using opposite Ishares Municipal and Vanguard Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Vanguard Global 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 Vanguard Global will offset losses from the drop in Vanguard Global's 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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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