Correlation Between High Yield and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both High Yield 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 High Yield and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund and Ishares Municipal Bond, you can compare the effects of market volatilities on High Yield 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 High Yield with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Ishares Municipal.
Diversification Opportunities for High Yield and Ishares Municipal
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HIGH and Ishares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund 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 High Yield 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 High Yield Fund 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 High Yield i.e., High Yield and Ishares Municipal go up and down completely randomly.
Pair Corralation between High Yield and Ishares Municipal
Assuming the 90 days horizon High Yield is expected to generate 2.67 times less return on investment than Ishares Municipal. But when comparing it to its historical volatility, High Yield Fund is 1.91 times less risky than Ishares Municipal. It trades about 0.14 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,101 in Ishares Municipal Bond on September 1, 2024 and sell it today you would earn a total of 14.00 from holding Ishares Municipal Bond or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
High Yield Fund vs. Ishares Municipal Bond
Performance |
| Timeline |
| High Yield Fund |
| Ishares Municipal Bond |
High Yield and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Ishares Municipal
The main advantage of trading using opposite High Yield and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield 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.| High Yield vs. Pimco Rae Worldwide | High Yield vs. Pimco Rae Worldwide | High Yield vs. Pimco Rae Worldwide | High Yield vs. Pimco Rae Worldwide |
| Ishares Municipal vs. Ultra Short Fixed Income | Ishares Municipal vs. Icon Equity Income | Ishares Municipal vs. The Gabelli Equity | Ishares Municipal vs. Us Vector Equity |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |