Correlation Between Ishares Municipal and Hotchkis Wiley

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

Diversification Opportunities for Ishares Municipal and Hotchkis Wiley

0.48

Correlation Coefficient

Ishares Municipal  Hotchkis Wiley

Very weak diversification

The 3 months correlation between Ishares and Hotchkis is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Hotchkis Wiley Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Value 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 Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Value has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Ishares Municipal and Hotchkis Wiley

Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 0.3 times more return on investment than Hotchkis Wiley. However, Ishares Municipal Bond is 3.36 times less risky than Hotchkis Wiley. It trades about -0.05 of its potential returns per unit of risk. Hotchkis Wiley Value is currently generating about -0.05 per unit of risk. If you would invest  1,115  in Ishares Municipal Bond on December 5, 2024 and sell it today you would lose (8.00) from holding Ishares Municipal Bond or give up 0.72% of portfolio value over 90 days.

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

Ishares Municipal Bond  vs.  Hotchkis Wiley Value

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.

Hotchkis Wiley Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hotchkis Wiley Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Hotchkis Wiley 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 Hotchkis Wiley

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

The idea behind Ishares Municipal Bond and Hotchkis Wiley Value 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.