Correlation Between Ishares Municipal and Baillie Gifford
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Baillie Gifford 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 Baillie Gifford 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 Baillie Gifford Emerging, you can compare the effects of market volatilities on Ishares Municipal and Baillie Gifford 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 Baillie Gifford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Baillie Gifford.
Diversification Opportunities for Ishares Municipal and Baillie Gifford
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ishares and Baillie is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Baillie Gifford Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford Emerging 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 Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford Emerging has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Baillie Gifford go up and down completely randomly.
Pair Corralation between Ishares Municipal and Baillie Gifford
Assuming the 90 days horizon Ishares Municipal is expected to generate 2.42 times less return on investment than Baillie Gifford. But when comparing it to its historical volatility, Ishares Municipal Bond is 4.04 times less risky than Baillie Gifford. It trades about 0.09 of its potential returns per unit of risk. Baillie Gifford Emerging is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,838 in Baillie Gifford Emerging on September 12, 2024 and sell it today you would earn a total of 327.00 from holding Baillie Gifford Emerging or generate 17.79% 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. Baillie Gifford Emerging
Performance |
| Timeline |
| Ishares Municipal Bond |
| Baillie Gifford Emerging |
Ishares Municipal and Baillie Gifford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Baillie Gifford
The main advantage of trading using opposite Ishares Municipal and Baillie Gifford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Baillie Gifford 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 Baillie Gifford will offset losses from the drop in Baillie Gifford's long position.The idea behind Ishares Municipal Bond and Baillie Gifford Emerging pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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