Correlation Between Ishares Municipal and Ave Maria

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

Diversification Opportunities for Ishares Municipal and Ave Maria

0.5

Correlation Coefficient

Ishares Municipal  Ave Maria

Very weak diversification

The 3 months correlation between Ishares and Ave is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Ave Maria Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ave Maria Bond 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 Ave Maria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ave Maria Bond has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Ave Maria go up and down completely randomly.

Pair Corralation between Ishares Municipal and Ave Maria

Assuming the 90 days horizon Ishares Municipal is expected to generate 1.29 times less return on investment than Ave Maria. In addition to that, Ishares Municipal is 1.19 times more volatile than Ave Maria Bond. It trades about 0.07 of its total potential returns per unit of risk. Ave Maria Bond is currently generating about 0.1 per unit of volatility. If you would invest  1,221  in Ave Maria Bond on September 4, 2024 and sell it today you would earn a total of  16.00  from holding Ave Maria Bond or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Ishares Municipal Bond  vs.  Ave Maria Bond

Ishares Municipal Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Municipal Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Ishares Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ave Maria Bond

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ave Maria Bond are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Ave Maria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Municipal and Ave Maria

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

The idea behind Ishares Municipal Bond and Ave Maria 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.