Correlation Between Ishares Municipal and Fidelity Government

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

Diversification Opportunities for Ishares Municipal and Fidelity Government

0.0

Correlation Coefficient

Ishares Municipal  Fidelity Government

Pay attention - limited upside

The 3 months correlation between Ishares and Fidelity is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Fidelity Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Government Money 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 Fidelity Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Government Money has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Fidelity Government go up and down completely randomly.

Pair Corralation between Ishares Municipal and Fidelity Government

Assuming the 90 days horizon Ishares Municipal is expected to generate 1.46 times less return on investment than Fidelity Government. In addition to that, Ishares Municipal is 2.28 times more volatile than Fidelity Government Money. It trades about 0.03 of its total potential returns per unit of risk. Fidelity Government Money is currently generating about 0.11 per unit of volatility. If you would invest  95.00  in Fidelity Government Money on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Fidelity Government Money or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.69%
Values	Daily Returns

Ishares Municipal Bond  vs.  Fidelity Government Money

Ishares Municipal Bond

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Municipal Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Fidelity Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Government Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity Government 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 Fidelity Government

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

The idea behind Ishares Municipal Bond and Fidelity Government Money 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.