Correlation Between Fixed Income and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Fixed Income 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 Fixed Income and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fixed Income Shares and Ishares Municipal Bond, you can compare the effects of market volatilities on Fixed Income 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 Fixed Income with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and Ishares Municipal.
Diversification Opportunities for Fixed Income and Ishares Municipal
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fixed and Ishares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fixed Income Shares 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 Fixed Income 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 Fixed Income Shares 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 Fixed Income i.e., Fixed Income and Ishares Municipal go up and down completely randomly.
Pair Corralation between Fixed Income and Ishares Municipal
Assuming the 90 days horizon Fixed Income Shares is expected to generate 2.51 times more return on investment than Ishares Municipal. However, Fixed Income is 2.51 times more volatile than Ishares Municipal Bond. It trades about 0.19 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.43 per unit of risk. If you would invest 893.00 in Fixed Income Shares on September 13, 2024 and sell it today you would earn a total of 11.00 from holding Fixed Income Shares or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fixed Income Shares vs. Ishares Municipal Bond
Performance |
| Timeline |
| Fixed Income Shares |
| Ishares Municipal Bond |
Fixed Income and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fixed Income and Ishares Municipal
The main advantage of trading using opposite Fixed Income and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fixed Income 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.| Fixed Income vs. Aam Select Income | Fixed Income vs. Fa 529 Aggressive | Fixed Income vs. Arrow Managed Futures | Fixed Income vs. Leggmason Partners Institutional |
| Ishares Municipal vs. Blackrock California Municipal | Ishares Municipal vs. Blackrock Balanced Capital | Ishares Municipal vs. Blackrock Eurofund Class | Ishares Municipal vs. Blackrock Funds |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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