Correlation Between Ishares Municipal and Western Asset
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Western Asset 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 Western Asset 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 Western Asset Municipal, you can compare the effects of market volatilities on Ishares Municipal and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Western Asset.
Diversification Opportunities for Ishares Municipal and Western Asset
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ishares and Western is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Western Asset Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Municipal 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Municipal has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Western Asset go up and down completely randomly.
Pair Corralation between Ishares Municipal and Western Asset
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 0.57 times more return on investment than Western Asset. However, Ishares Municipal Bond is 1.74 times less risky than Western Asset. It trades about 0.48 of its potential returns per unit of risk. Western Asset Municipal 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Western Asset Municipal
Performance |
| Timeline |
| Ishares Municipal Bond |
| Western Asset Municipal |
Ishares Municipal and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Western Asset
The main advantage of trading using opposite Ishares Municipal and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Barings Active Short | Western Asset vs. Cmg Ultra Short | Western Asset vs. Blackrock Short Term Inflat Protected | Western Asset vs. Rbc Short Duration |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |