Correlation Between Ishares Municipal and Fixed Income
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Fixed Income 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 Fixed Income 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 Fixed Income Shares, you can compare the effects of market volatilities on Ishares Municipal and Fixed Income 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 Fixed Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Fixed Income.
Diversification Opportunities for Ishares Municipal and Fixed Income
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ishares and Fixed is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Fixed Income Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fixed Income Shares 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 Fixed Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fixed Income Shares has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Fixed Income go up and down completely randomly.
Pair Corralation between Ishares Municipal and Fixed Income
Assuming the 90 days horizon Ishares Municipal is expected to generate 1.34 times less return on investment than Fixed Income. But when comparing it to its historical volatility, Ishares Municipal Bond is 2.58 times less risky than Fixed Income. It trades about 0.48 of its potential returns per unit of risk. Fixed Income Shares is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 893.00 in Fixed Income Shares on September 13, 2024 and sell it today you would earn a total of 14.00 from holding Fixed Income Shares or generate 1.57% 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. Fixed Income Shares
Performance |
| Timeline |
| Ishares Municipal Bond |
| Fixed Income Shares |
Ishares Municipal and Fixed Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Fixed Income
The main advantage of trading using opposite Ishares Municipal and Fixed Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Fixed Income 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 Fixed Income will offset losses from the drop in Fixed Income's long position.| Ishares Municipal vs. Calamos Dynamic Convertible | Ishares Municipal vs. Allianzgi Convertible Income | Ishares Municipal vs. Fidelity Sai Convertible | Ishares Municipal vs. Absolute Convertible Arbitrage |
| Fixed Income vs. Ishares Municipal Bond | Fixed Income vs. Franklin High Yield | Fixed Income vs. Touchstone Premium Yield | Fixed Income vs. Pace High Yield |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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