Correlation Between Ishares Municipal and Doubleline Yield

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

Diversification Opportunities for Ishares Municipal and Doubleline Yield

0.71

Correlation Coefficient

Ishares Municipal  Doubleline Yield

Poor diversification

The 3 months correlation between Ishares and Doubleline is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Doubleline Yield Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doubleline Yield Opp 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 Doubleline Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doubleline Yield Opp has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Doubleline Yield go up and down completely randomly.

Pair Corralation between Ishares Municipal and Doubleline Yield

Assuming the 90 days horizon Ishares Municipal Bond is expected to generate 1.27 times more return on investment than Doubleline Yield. However, Ishares Municipal is 1.27 times more volatile than Doubleline Yield Opportunities. It trades about -0.04 of its potential returns per unit of risk. Doubleline Yield Opportunities is currently generating about -0.08 per unit of risk. If you would invest  1,114  in Ishares Municipal Bond on September 16, 2024 and sell it today you would lose (7.00) from holding Ishares Municipal Bond or give up 0.63% of portfolio value over 90 days.

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

Ishares Municipal Bond  vs.  Doubleline Yield Opportunities

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.

Doubleline Yield Opp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Ishares Municipal Bond and Doubleline Yield Opportunities 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.