Correlation Between Ishares Municipal and Multi Manager

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

Diversification Opportunities for Ishares Municipal and Multi Manager

0.44

Correlation Coefficient

Ishares Municipal  Multi Manager

Very weak diversification

The 3 months correlation between Ishares and Multi is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High 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 Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Multi Manager go up and down completely randomly.

Pair Corralation between Ishares Municipal and Multi Manager

Assuming the 90 days horizon Ishares Municipal is expected to generate 14.95 times less return on investment than Multi Manager. In addition to that, Ishares Municipal is 1.91 times more volatile than Multi Manager High Yield. It trades about 0.01 of its total potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.19 per unit of volatility. If you would invest  833.00  in Multi Manager High Yield on October 25, 2024 and sell it today you would earn a total of  14.00  from holding Multi Manager High Yield or generate 1.68% return on investment over 90 days.

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

Ishares Municipal Bond  vs.  Multi Manager High Yield

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.

Multi Manager High

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager High Yield are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Manager 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 Multi Manager

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

The idea behind Ishares Municipal Bond and Multi Manager High Yield 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..