Correlation Between Short Term and Ishares Municipal

Can any of the company-specific risk be diversified away by investing in both Short 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 Short 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 The Short Term Municipal and Ishares Municipal Bond, you can compare the effects of market volatilities on Short 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 Short Term with a short position of Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and Ishares Municipal.

Diversification Opportunities for Short Term and Ishares Municipal

0.19

Correlation Coefficient

Short Term  Ishares Municipal

Average diversification

The 3 months correlation between Short and Ishares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Short Term Municipal 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 Short 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 The Short Term Municipal 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 Short Term i.e., Short Term and Ishares Municipal go up and down completely randomly.

Pair Corralation between Short Term and Ishares Municipal

Assuming the 90 days horizon The Short Term Municipal is expected to generate 0.44 times more return on investment than Ishares Municipal. However, The Short Term Municipal is 2.29 times less risky than Ishares Municipal. It trades about 0.28 of its potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.05 per unit of risk. If you would invest  954.00  in The Short Term Municipal on May 5, 2025 and sell it today you would earn a total of  11.00  from holding The Short Term Municipal or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Short Term Municipal  vs.  Ishares Municipal Bond

Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Short Term Municipal are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ishares Municipal Bond

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Municipal Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Short Term and Ishares Municipal

The main advantage of trading using opposite Short Term and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short 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.

The idea behind The Short Term Municipal and Ishares Municipal Bond 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.