Correlation Between Ishares Municipal and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Inverse Government 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 Inverse Government 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 Inverse Government Long, you can compare the effects of market volatilities on Ishares Municipal and Inverse Government 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 Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Inverse Government.
Diversification Opportunities for Ishares Municipal and Inverse Government
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ishares and Inverse is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long 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 Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Inverse Government go up and down completely randomly.
Pair Corralation between Ishares Municipal and Inverse Government
Assuming the 90 days horizon Ishares Municipal Bond is expected to under-perform the Inverse Government. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ishares Municipal Bond is 2.11 times less risky than Inverse Government. The mutual fund trades about -0.25 of its potential returns per unit of risk. The Inverse Government Long is currently generating about 0.66 of returns per unit of risk over similar time horizon. If you would invest 17,443 in Inverse Government Long on October 11, 2024 and sell it today you would earn a total of 1,514 from holding Inverse Government Long or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Inverse Government Long
Performance |
| Timeline |
| Ishares Municipal Bond |
| Inverse Government Long |
Ishares Municipal and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Inverse Government
The main advantage of trading using opposite Ishares Municipal and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Inverse Government 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 Inverse Government will offset losses from the drop in Inverse Government's long position.| Ishares Municipal vs. Fidelity Capital Income | Ishares Municipal vs. Lord Abbett Short | Ishares Municipal vs. Msift High Yield | Ishares Municipal vs. Buffalo High Yield |
| Inverse Government vs. Franklin Government Money | Inverse Government vs. Bbh Intermediate Municipal | Inverse Government vs. Maryland Tax Free Bond | Inverse Government vs. Leader Short Term Bond |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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