Correlation Between Ishares Municipal and Invesco Emerging
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Invesco Emerging 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 Invesco Emerging 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 Invesco Emerging Markets, you can compare the effects of market volatilities on Ishares Municipal and Invesco Emerging 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 Invesco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Invesco Emerging.
Diversification Opportunities for Ishares Municipal and Invesco Emerging
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ishares and Invesco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Invesco Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Emerging Markets 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 Invesco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Emerging Markets has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Invesco Emerging go up and down completely randomly.
Pair Corralation between Ishares Municipal and Invesco Emerging
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 0.64 times more return on investment than Invesco Emerging. However, Ishares Municipal Bond is 1.57 times less risky than Invesco Emerging. It trades about 0.2 of its potential returns per unit of risk. Invesco Emerging Markets is currently generating about -0.05 per unit of risk. If you would invest 1,101 in Ishares Municipal Bond on September 1, 2024 and sell it today you would earn a total of 14.00 from holding Ishares Municipal Bond or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Invesco Emerging Markets
Performance |
| Timeline |
| Ishares Municipal Bond |
| Invesco Emerging Markets |
Ishares Municipal and Invesco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Invesco Emerging
The main advantage of trading using opposite Ishares Municipal and Invesco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Invesco Emerging 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 Invesco Emerging will offset losses from the drop in Invesco Emerging's long position.| Ishares Municipal vs. Ultra Short Fixed Income | Ishares Municipal vs. Icon Equity Income | Ishares Municipal vs. The Gabelli Equity | Ishares Municipal vs. Us Vector Equity |
| Invesco Emerging vs. Invesco Municipal Income | Invesco Emerging vs. Invesco Municipal Income | Invesco Emerging vs. Invesco Municipal Income | Invesco Emerging vs. Oppenheimer Rising Dividends |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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