Correlation Between Ishares Municipal and Multi-manager High
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Multi-manager High 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 Multi-manager High 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 Multi Manager High Yield, you can compare the effects of market volatilities on Ishares Municipal and Multi-manager High 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 Multi-manager High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Multi-manager High.
Diversification Opportunities for Ishares Municipal and Multi-manager High
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ishares and Multi-manager is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High 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 Multi-manager High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Multi-manager High go up and down completely randomly.
Pair Corralation between Ishares Municipal and Multi-manager High
Assuming the 90 days horizon Ishares Municipal Bond is expected to under-perform the Multi-manager High. In addition to that, Ishares Municipal is 1.76 times more volatile than Multi Manager High Yield. It trades about -0.28 of its total potential returns per unit of risk. Multi Manager High Yield is currently generating about -0.11 per unit of volatility. If you would invest 844.00 in Multi Manager High Yield on October 11, 2024 and sell it today you would lose (3.00) from holding Multi Manager High Yield or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Multi Manager High Yield
Performance |
| Timeline |
| Ishares Municipal Bond |
| Multi Manager High |
Ishares Municipal and Multi-manager High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Multi-manager High
The main advantage of trading using opposite Ishares Municipal and Multi-manager High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Multi-manager High 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 Multi-manager High will offset losses from the drop in Multi-manager High's long position.| Ishares Municipal vs. Qs Moderate Growth | Ishares Municipal vs. Wilmington Trust Retirement | Ishares Municipal vs. Columbia Moderate Growth | Ishares Municipal vs. Tiaa Cref Lifestyle Moderate |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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