Correlation Between Intermediate-term and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Intermediate-term 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 Intermediate-term and Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Bond Fund and Ishares Municipal Bond, you can compare the effects of market volatilities on Intermediate-term 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 Intermediate-term with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Ishares Municipal.
Diversification Opportunities for Intermediate-term and Ishares Municipal
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intermediate-term and Ishares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond 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 Intermediate-term 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 Intermediate Term Bond 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 Intermediate-term i.e., Intermediate-term and Ishares Municipal go up and down completely randomly.
Pair Corralation between Intermediate-term and Ishares Municipal
Assuming the 90 days horizon Intermediate Term Bond Fund is expected to under-perform the Ishares Municipal. In addition to that, Intermediate-term is 1.16 times more volatile than Ishares Municipal Bond. It trades about -0.12 of its total potential returns per unit of risk. Ishares Municipal Bond is currently generating about -0.01 per unit of volatility. If you would invest 1,117 in Ishares Municipal Bond on August 31, 2024 and sell it today you would lose (2.00) from holding Ishares Municipal Bond or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Bond Fund vs. Ishares Municipal Bond
Performance |
| Timeline |
| Intermediate Term Bond |
| Ishares Municipal Bond |
Intermediate-term and Ishares Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Ishares Municipal
The main advantage of trading using opposite Intermediate-term and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term 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.| Intermediate-term vs. Federated Institutional High | Intermediate-term vs. Western Asset High | Intermediate-term vs. Artisan High Income | Intermediate-term vs. Pioneer High Yield |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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