Correlation Between IShares Emergent and High Yield

Can any of the company-specific risk be diversified away by investing in both IShares Emergent and High 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 Emergent and High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Emergent Food and High Yield Municipal Fund, you can compare the effects of market volatilities on IShares Emergent and High 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 Emergent with a short position of High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Emergent and High Yield.

Diversification Opportunities for IShares Emergent and High Yield

0.69

Correlation Coefficient

IShares Emergent  High Yield

Poor diversification

The 3 months correlation between IShares and High is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emergent Food and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and IShares Emergent 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 Emergent Food are associated (or correlated) with High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of IShares Emergent i.e., IShares Emergent and High Yield go up and down completely randomly.

Pair Corralation between IShares Emergent and High Yield

Given the investment horizon of 90 days iShares Emergent Food is expected to under-perform the High Yield. In addition to that, IShares Emergent is 2.29 times more volatile than High Yield Municipal Fund. It trades about -0.11 of its total potential returns per unit of risk. High Yield Municipal Fund is currently generating about -0.1 per unit of volatility. If you would invest  903.00  in High Yield Municipal Fund on September 30, 2024 and sell it today you would lose (19.00) from holding High Yield Municipal Fund or give up 2.1% of portfolio value over 90 days.

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

iShares Emergent Food  vs.  High Yield Municipal Fund

iShares Emergent Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Emergent Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Emergent is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind iShares Emergent Food and High Yield Municipal Fund 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.