Correlation Between Ishares Municipal and Mfs Massachusetts
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Mfs Massachusetts 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 Mfs Massachusetts 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 Mfs Massachusetts Municipal, you can compare the effects of market volatilities on Ishares Municipal and Mfs Massachusetts 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 Mfs Massachusetts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Mfs Massachusetts.
Diversification Opportunities for Ishares Municipal and Mfs Massachusetts
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ishares and Mfs is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Mfs Massachusetts Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Massachusetts 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 Mfs Massachusetts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Massachusetts has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Mfs Massachusetts go up and down completely randomly.
Pair Corralation between Ishares Municipal and Mfs Massachusetts
Assuming the 90 days horizon Ishares Municipal is expected to generate 1.16 times less return on investment than Mfs Massachusetts. But when comparing it to its historical volatility, Ishares Municipal Bond is 1.03 times less risky than Mfs Massachusetts. It trades about 0.09 of its potential returns per unit of risk. Mfs Massachusetts Municipal is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 952.00 in Mfs Massachusetts Municipal on September 12, 2024 and sell it today you would earn a total of 85.00 from holding Mfs Massachusetts Municipal or generate 8.93% 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. Mfs Massachusetts Municipal
Performance |
| Timeline |
| Ishares Municipal Bond |
| Mfs Massachusetts |
Ishares Municipal and Mfs Massachusetts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Mfs Massachusetts
The main advantage of trading using opposite Ishares Municipal and Mfs Massachusetts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Mfs Massachusetts 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 Mfs Massachusetts will offset losses from the drop in Mfs Massachusetts' long position.The idea behind Ishares Municipal Bond and Mfs Massachusetts Municipal 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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