Correlation Between Ishares Municipal and Calvert Emerging

Can any of the company-specific risk be diversified away by investing in both Ishares Municipal and Calvert Emerging 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 Ishares Municipal and Calvert Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ishares Municipal Bond and Calvert Emerging Markets, you can compare the effects of market volatilities on Ishares Municipal and Calvert Emerging 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 Ishares Municipal with a short position of Calvert Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and Calvert Emerging.

Diversification Opportunities for Ishares Municipal and Calvert Emerging

0.49

Correlation Coefficient

Ishares Municipal  Calvert Emerging

Very weak diversification

The 3 months correlation between Ishares and Calvert is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Calvert Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Emerging Markets and Ishares Municipal 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 Ishares Municipal Bond are associated (or correlated) with Calvert Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Emerging Markets has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Calvert Emerging go up and down completely randomly.

Pair Corralation between Ishares Municipal and Calvert Emerging

Assuming the 90 days horizon Ishares Municipal Bond is expected to under-perform the Calvert Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ishares Municipal Bond is 4.98 times less risky than Calvert Emerging. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Calvert Emerging Markets is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,155  in Calvert Emerging Markets on May 4, 2025 and sell it today you would earn a total of  9.00  from holding Calvert Emerging Markets or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Ishares Municipal Bond  vs.  Calvert Emerging Markets

Ishares Municipal Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ishares Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ishares Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calvert Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Emerging Markets are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert Emerging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Municipal and Calvert Emerging

The main advantage of trading using opposite Ishares Municipal and Calvert Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal position performs unexpectedly, Calvert Emerging 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 Calvert Emerging will offset losses from the drop in Calvert Emerging's long position.

The idea behind Ishares Municipal Bond and Calvert Emerging Markets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.