Correlation Between Bats Series and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Bats Series and Ishares 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 Bats Series and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bats Series M and Ishares Municipal Bond, you can compare the effects of market volatilities on Bats Series and Ishares 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 Bats Series with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bats Series and Ishares Municipal.
Diversification Opportunities for Bats Series and Ishares Municipal
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bats and Ishares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bats Series M and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond and Bats Series 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 Bats Series M are associated (or correlated) with Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Bats Series i.e., Bats Series and Ishares Municipal go up and down completely randomly.
Pair Corralation between Bats Series and Ishares Municipal
Assuming the 90 days horizon Bats Series M is expected to generate 2.72 times more return on investment than Ishares Municipal. However, Bats Series is 2.72 times more volatile than Ishares Municipal Bond. It trades about 0.18 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.48 per unit of risk. If you would invest 833.00 in Bats Series M on September 12, 2024 and sell it today you would earn a total of 10.00 from holding Bats Series M or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bats Series M vs. Ishares Municipal Bond
Performance |
| Timeline |
| Bats Series M |
| Ishares Municipal Bond |
Bats Series and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bats Series and Ishares Municipal
The main advantage of trading using opposite Bats Series and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bats Series position performs unexpectedly, Ishares 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 Ishares Municipal will offset losses from the drop in Ishares Municipal's long position.| Bats Series vs. SCOR PK | Bats Series vs. Morningstar Unconstrained Allocation | Bats Series vs. Thrivent High Yield | Bats Series vs. Via Renewables |
| Ishares Municipal vs. Western Asset Municipal | Ishares Municipal vs. Multisector Bond Sma | Ishares Municipal vs. Ambrus Core Bond | Ishares Municipal vs. Pace 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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