Correlation Between Ishares Municipal and Stet Intermediate
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Stet Intermediate 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 Stet Intermediate 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 Stet Intermediate Term, you can compare the effects of market volatilities on Ishares Municipal and Stet Intermediate 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 Stet Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Stet Intermediate.
Diversification Opportunities for Ishares Municipal and Stet Intermediate
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Ishares and Stet is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Stet Intermediate Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stet Intermediate Term 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 Stet Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stet Intermediate Term has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Stet Intermediate go up and down completely randomly.
Pair Corralation between Ishares Municipal and Stet Intermediate
Assuming the 90 days horizon Ishares Municipal is expected to generate 1.07 times less return on investment than Stet Intermediate. In addition to that, Ishares Municipal is 1.28 times more volatile than Stet Intermediate Term. It trades about 0.06 of its total potential returns per unit of risk. Stet Intermediate Term is currently generating about 0.08 per unit of volatility. If you would invest 1,040 in Stet Intermediate Term on August 28, 2024 and sell it today you would earn a total of 75.00 from holding Stet Intermediate Term or generate 7.21% 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. Stet Intermediate Term
Performance |
| Timeline |
| Ishares Municipal Bond |
| Stet Intermediate Term |
Ishares Municipal and Stet Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Stet Intermediate
The main advantage of trading using opposite Ishares Municipal and Stet Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Stet Intermediate 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 Stet Intermediate will offset losses from the drop in Stet Intermediate's long position.| Ishares Municipal vs. Champlain Small | Ishares Municipal vs. Small Pany Growth | Ishares Municipal vs. Touchstone Small Cap | Ishares Municipal vs. Ab Small Cap |
| Stet Intermediate vs. Sit International Equity | Stet Intermediate vs. Intermediate Taxamt Free Fund | Stet Intermediate vs. Goldman Sachs Short | Stet Intermediate vs. Simt High Yield |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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