Correlation Between Ishares Municipal and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Pace Municipal 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 Pace Municipal 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 Pace Municipal Fixed, you can compare the effects of market volatilities on Ishares Municipal and Pace Municipal 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 Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Pace Municipal.
Diversification Opportunities for Ishares Municipal and Pace Municipal
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ishares and Pace is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Pace Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Municipal Fixed 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 Pace Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Municipal Fixed has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Pace Municipal go up and down completely randomly.
Pair Corralation between Ishares Municipal and Pace Municipal
Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 1.22 times more return on investment than Pace Municipal. However, Ishares Municipal is 1.22 times more volatile than Pace Municipal Fixed. It trades about 0.17 of its potential returns per unit of risk. Pace Municipal Fixed is currently generating about 0.13 per unit of risk. If you would invest 1,095 in Ishares Municipal Bond on August 24, 2024 and sell it today you would earn a total of 13.00 from holding Ishares Municipal Bond or generate 1.19% 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. Pace Municipal Fixed
Performance |
| Timeline |
| Ishares Municipal Bond |
| Pace Municipal Fixed |
Ishares Municipal and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Pace Municipal
The main advantage of trading using opposite Ishares Municipal and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Pace Municipal 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 Pace Municipal will offset losses from the drop in Pace Municipal's long position.| Ishares Municipal vs. Balanced Fund Retail | Ishares Municipal vs. Cutler Equity | Ishares Municipal vs. Vanguard Telecommunication Services | Ishares Municipal vs. Rbc Global Equity |
| Pace Municipal vs. Fidelity Advisor Diversified | Pace Municipal vs. Pgim Conservative Retirement | Pace Municipal vs. Massmutual Premier Diversified | Pace Municipal vs. Huber Capital Diversified |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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