Correlation Between Multisector Bond and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Multisector Bond 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 Multisector Bond and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and Ishares Municipal Bond, you can compare the effects of market volatilities on Multisector Bond 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 Multisector Bond with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and Ishares Municipal.
Diversification Opportunities for Multisector Bond and Ishares Municipal
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multisector and Ishares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma 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 Multisector Bond 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 Multisector Bond Sma 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 Multisector Bond i.e., Multisector Bond and Ishares Municipal go up and down completely randomly.
Pair Corralation between Multisector Bond and Ishares Municipal
Assuming the 90 days horizon Multisector Bond Sma is expected to generate 1.02 times more return on investment than Ishares Municipal. However, Multisector Bond is 1.02 times more volatile than Ishares Municipal Bond. It trades about 0.1 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.08 per unit of risk. If you would invest 1,360 in Multisector Bond Sma on September 13, 2024 and sell it today you would earn a total of 16.00 from holding Multisector Bond Sma or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multisector Bond Sma vs. Ishares Municipal Bond
Performance |
| Timeline |
| Multisector Bond Sma |
| Ishares Municipal Bond |
Multisector Bond and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multisector Bond and Ishares Municipal
The main advantage of trading using opposite Multisector Bond and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond 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.| Multisector Bond vs. Vanguard Information Technology | Multisector Bond vs. Hennessy Technology Fund | Multisector Bond vs. Janus Global Technology | Multisector Bond vs. Icon Information Technology |
| Ishares Municipal vs. Calvert Moderate Allocation | Ishares Municipal vs. Fidelity Managed Retirement | Ishares Municipal vs. Deutsche Multi Asset Moderate | Ishares Municipal vs. Blackrock Moderate Prepared |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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