Correlation Between Ishares Municipal and Eaton Vance
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Eaton Vance 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 Eaton Vance 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 Eaton Vance South, you can compare the effects of market volatilities on Ishares Municipal and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Eaton Vance.
Diversification Opportunities for Ishares Municipal and Eaton Vance
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ishares and Eaton is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Eaton Vance South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance South 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance South has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Eaton Vance go up and down completely randomly.
Pair Corralation between Ishares Municipal and Eaton Vance
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 1.07 times more return on investment than Eaton Vance. However, Ishares Municipal is 1.07 times more volatile than Eaton Vance South. It trades about 0.09 of its potential returns per unit of risk. Eaton Vance South is currently generating about 0.08 per unit of risk. If you would invest 1,041 in Ishares Municipal Bond on September 12, 2024 and sell it today you would earn a total of 79.00 from holding Ishares Municipal Bond or generate 7.59% 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. Eaton Vance South
Performance |
| Timeline |
| Ishares Municipal Bond |
| Eaton Vance South |
Ishares Municipal and Eaton Vance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Eaton Vance
The main advantage of trading using opposite Ishares Municipal and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.The idea behind Ishares Municipal Bond and Eaton Vance South 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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