Correlation Between Pace High and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Pace High 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 Pace High and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace High Yield and Ishares Municipal Bond, you can compare the effects of market volatilities on Pace High 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 Pace High with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and Ishares Municipal.
Diversification Opportunities for Pace High and Ishares Municipal
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pace and Ishares is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield 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 Pace High 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 Pace High Yield 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 Pace High i.e., Pace High and Ishares Municipal go up and down completely randomly.
Pair Corralation between Pace High and Ishares Municipal
Assuming the 90 days horizon Pace High is expected to generate 1.32 times less return on investment than Ishares Municipal. But when comparing it to its historical volatility, Pace High Yield is 1.29 times less risky than Ishares Municipal. It trades about 0.47 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 1,105 in Ishares Municipal Bond on September 13, 2024 and sell it today you would earn a total of 13.00 from holding Ishares Municipal Bond or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace High Yield vs. Ishares Municipal Bond
Performance |
| Timeline |
| Pace High Yield |
| Ishares Municipal Bond |
Pace High and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace High and Ishares Municipal
The main advantage of trading using opposite Pace High and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace High 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.| Pace High vs. Pace Smallmedium Value | Pace High vs. Pace International Equity | Pace High vs. Pace International Equity | Pace High vs. Ubs Allocation Fund |
| Ishares Municipal vs. Calamos Dynamic Convertible | Ishares Municipal vs. Allianzgi Convertible Income | Ishares Municipal vs. Fidelity Sai Convertible | Ishares Municipal vs. Absolute Convertible Arbitrage |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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