Correlation Between Ishares Municipal and Icon Bond
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Icon Bond 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 Icon Bond 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 Icon Bond Fund, you can compare the effects of market volatilities on Ishares Municipal and Icon Bond 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 Icon Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Icon Bond.
Diversification Opportunities for Ishares Municipal and Icon Bond
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ishares and Icon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Icon Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Bond Fund 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 Icon Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Bond Fund has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Icon Bond go up and down completely randomly.
Pair Corralation between Ishares Municipal and Icon Bond
Assuming the 90 days horizon Ishares Municipal is expected to generate 1.89 times less return on investment than Icon Bond. In addition to that, Ishares Municipal is 1.36 times more volatile than Icon Bond Fund. It trades about 0.07 of its total potential returns per unit of risk. Icon Bond Fund is currently generating about 0.18 per unit of volatility. If you would invest 741.00 in Icon Bond Fund on September 12, 2024 and sell it today you would earn a total of 127.00 from holding Icon Bond Fund or generate 17.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Icon Bond Fund
Performance |
| Timeline |
| Ishares Municipal Bond |
| Icon Bond Fund |
Ishares Municipal and Icon Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Icon Bond
The main advantage of trading using opposite Ishares Municipal and Icon Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Icon Bond 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 Icon Bond will offset losses from the drop in Icon Bond's long position.The idea behind Ishares Municipal Bond and Icon Bond Fund 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.
| Icon Bond vs. Morningstar Defensive Bond | Icon Bond vs. The National Tax Free | Icon Bond vs. Ishares Municipal Bond | Icon Bond vs. Ambrus Core Bond |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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