Correlation Between Ishares Municipal and Payden Emerging
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Payden Emerging 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 Payden Emerging 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 Payden Emerging Markets, you can compare the effects of market volatilities on Ishares Municipal and Payden Emerging 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 Payden Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Payden Emerging.
Diversification Opportunities for Ishares Municipal and Payden Emerging
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ishares and Payden is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Payden Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Emerging Markets 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 Payden Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Emerging Markets has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Payden Emerging go up and down completely randomly.
Pair Corralation between Ishares Municipal and Payden Emerging
If you would invest 1,041 in Ishares Municipal Bond on September 12, 2024 and sell it today you would earn a total of 79.00 from holding Ishares Municipal Bond or generate 7.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Payden Emerging Markets
Performance |
| Timeline |
| Ishares Municipal Bond |
| Payden Emerging Markets |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ishares Municipal and Payden Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Payden Emerging
The main advantage of trading using opposite Ishares Municipal and Payden Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Payden Emerging 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 Payden Emerging will offset losses from the drop in Payden Emerging's long position.The idea behind Ishares Municipal Bond and Payden Emerging Markets 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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