Correlation Between Ishares Municipal and Touchstone Arbitrage
Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Touchstone Arbitrage 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 Touchstone Arbitrage 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 Touchstone Arbitrage Fund, you can compare the effects of market volatilities on Ishares Municipal and Touchstone Arbitrage 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 Touchstone Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Touchstone Arbitrage.
Diversification Opportunities for Ishares Municipal and Touchstone Arbitrage
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ishares and Touchstone is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Touchstone Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Arbitrage 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 Touchstone Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Arbitrage has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Touchstone Arbitrage go up and down completely randomly.
Pair Corralation between Ishares Municipal and Touchstone Arbitrage
Assuming the 90 days horizon Ishares Municipal is expected to generate 3.5 times less return on investment than Touchstone Arbitrage. In addition to that, Ishares Municipal is 1.08 times more volatile than Touchstone Arbitrage Fund. It trades about 0.06 of its total potential returns per unit of risk. Touchstone Arbitrage Fund is currently generating about 0.22 per unit of volatility. If you would invest 854.00 in Touchstone Arbitrage Fund on September 12, 2024 and sell it today you would earn a total of 90.00 from holding Touchstone Arbitrage Fund or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Ishares Municipal Bond vs. Touchstone Arbitrage Fund
Performance |
| Timeline |
| Ishares Municipal Bond |
| Touchstone Arbitrage |
Ishares Municipal and Touchstone Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ishares Municipal and Touchstone Arbitrage
The main advantage of trading using opposite Ishares Municipal and Touchstone Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Touchstone Arbitrage 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 Touchstone Arbitrage will offset losses from the drop in Touchstone Arbitrage's long position.| Ishares Municipal vs. Calamos Dynamic Convertible | Ishares Municipal vs. Allianzgi Convertible Income | Ishares Municipal vs. Fidelity Sai Convertible | Ishares Municipal vs. Absolute Convertible Arbitrage |
| Touchstone Arbitrage vs. The National Tax Free | Touchstone Arbitrage vs. Ishares Municipal Bond | Touchstone Arbitrage vs. Multisector Bond Sma | Touchstone Arbitrage vs. Franklin 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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