Correlation Between Advent Claymore and Ishares Municipal

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

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

Diversification Opportunities for Advent Claymore and Ishares Municipal

0.36

Correlation Coefficient

Advent Claymore  Ishares Municipal

Weak diversification

The 3 months correlation between Advent and Ishares is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Advent Claymore Convertible 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 Advent Claymore 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 Advent Claymore Convertible 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 Advent Claymore i.e., Advent Claymore and Ishares Municipal go up and down completely randomly.

Pair Corralation between Advent Claymore and Ishares Municipal

Considering the 90-day investment horizon Advent Claymore Convertible is expected to generate 3.83 times more return on investment than Ishares Municipal. However, Advent Claymore is 3.83 times more volatile than Ishares Municipal Bond. It trades about 0.07 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  923.00  in Advent Claymore Convertible on October 4, 2024 and sell it today you would earn a total of  254.00  from holding Advent Claymore Convertible or generate 27.52% return on investment over 90 days.

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

Advent Claymore Convertible  vs.  Ishares Municipal Bond

Advent Claymore Conv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Claymore Convertible are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Advent Claymore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ishares Municipal Bond

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Advent Claymore and Ishares Municipal

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

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.