Correlation Between Ishares Municipal and Optimum Fixed
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Optimum Fixed 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 Optimum Fixed 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 Optimum Fixed Income, you can compare the effects of market volatilities on Ishares Municipal and Optimum Fixed 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 Optimum Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Optimum Fixed.
Diversification Opportunities for Ishares Municipal and Optimum Fixed
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ishares and Optimum is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Optimum Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Fixed Income 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 Optimum Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Fixed Income has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Optimum Fixed go up and down completely randomly.
Pair Corralation between Ishares Municipal and Optimum Fixed
Assuming the 90 days horizon Ishares Municipal is expected to generate 1.06 times less return on investment than Optimum Fixed. But when comparing it to its historical volatility, Ishares Municipal Bond is 1.79 times less risky than Optimum Fixed. It trades about 0.15 of its potential returns per unit of risk. Optimum Fixed Income is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 806.00 in Optimum Fixed Income on September 1, 2024 and sell it today you would earn a total of 75.00 from holding Optimum Fixed Income or generate 9.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Optimum Fixed Income
Performance |
| Timeline |
| Ishares Municipal Bond |
| Optimum Fixed Income |
Ishares Municipal and Optimum Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Optimum Fixed
The main advantage of trading using opposite Ishares Municipal and Optimum Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Optimum Fixed 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 Optimum Fixed will offset losses from the drop in Optimum Fixed'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 |
| Optimum Fixed vs. Optimum Small Mid Cap | Optimum Fixed vs. Optimum Small Mid Cap | Optimum Fixed vs. Ivy Apollo Multi Asset | Optimum Fixed vs. Ivy Asset Strategy |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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