Correlation Between Ishares Municipal and World Energy
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and World Energy 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 World Energy 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 World Energy Fund, you can compare the effects of market volatilities on Ishares Municipal and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and World Energy.
Diversification Opportunities for Ishares Municipal and World Energy
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ishares and World is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World 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 World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and World Energy go up and down completely randomly.
Pair Corralation between Ishares Municipal and World Energy
Assuming the 90 days horizon Ishares Municipal is expected to generate 16.04 times less return on investment than World Energy. But when comparing it to its historical volatility, Ishares Municipal Bond is 4.64 times less risky than World Energy. It trades about 0.07 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,322 in World Energy Fund on September 2, 2024 and sell it today you would earn a total of 225.00 from holding World Energy Fund or generate 17.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. World Energy Fund
Performance |
| Timeline |
| Ishares Municipal Bond |
| World Energy |
Ishares Municipal and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and World Energy
The main advantage of trading using opposite Ishares Municipal and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Ishares Municipal vs. Calvert Developed Market | Ishares Municipal vs. Siit Emerging Markets | Ishares Municipal vs. Locorr Market Trend | Ishares Municipal vs. Ab All Market |
| World Energy vs. Vanguard Small Cap Value | World Energy vs. Fidelity Small Cap | World Energy vs. Pace Smallmedium Value | World Energy vs. Palm Valley Capital |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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