Correlation Between IShares National and Avantis Core

Can any of the company-specific risk be diversified away by investing in both IShares National and Avantis Core 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 National and Avantis Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares National Muni and Avantis Core Fixed, you can compare the effects of market volatilities on IShares National and Avantis Core 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 National with a short position of Avantis Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares National and Avantis Core.

Diversification Opportunities for IShares National and Avantis Core

0.49

Correlation Coefficient

IShares National  Avantis Core

Very weak diversification

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

Pair Corralation between IShares National and Avantis Core

Considering the 90-day investment horizon IShares National is expected to generate 5.28 times less return on investment than Avantis Core. But when comparing it to its historical volatility, iShares National Muni is 1.49 times less risky than Avantis Core. It trades about 0.04 of its potential returns per unit of risk. Avantis Core Fixed is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,049  in Avantis Core Fixed on May 6, 2025 and sell it today you would earn a total of  109.00  from holding Avantis Core Fixed or generate 2.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

iShares National Muni  vs.  Avantis Core Fixed

iShares National Muni

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares National Muni are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avantis Core Fixed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Core Fixed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Avantis Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares National and Avantis Core

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

The idea behind iShares National Muni and Avantis Core Fixed 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.