Correlation Between IShares MBS and VanEck Intermediate

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

By analyzing existing cross correlation between iShares MBS ETF and VanEck Intermediate Muni, you can compare the effects of market volatilities on IShares MBS and VanEck Intermediate 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 MBS with a short position of VanEck Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MBS and VanEck Intermediate.

Diversification Opportunities for IShares MBS and VanEck Intermediate

0.59

Correlation Coefficient

IShares MBS  VanEck Intermediate

Very weak diversification

The 3 months correlation between IShares and VanEck is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding iShares MBS ETF and VanEck Intermediate Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Intermediate Muni and IShares MBS 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 MBS ETF are associated (or correlated) with VanEck Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Intermediate Muni has no effect on the direction of IShares MBS i.e., IShares MBS and VanEck Intermediate go up and down completely randomly.

Pair Corralation between IShares MBS and VanEck Intermediate

Considering the 90-day investment horizon iShares MBS ETF is expected to generate 1.4 times more return on investment than VanEck Intermediate. However, IShares MBS is 1.4 times more volatile than VanEck Intermediate Muni. It trades about 0.11 of its potential returns per unit of risk. VanEck Intermediate Muni is currently generating about -0.09 per unit of risk. If you would invest  9,111  in iShares MBS ETF on December 28, 2024 and sell it today you would earn a total of  191.00  from holding iShares MBS ETF or generate 2.1% return on investment over 90 days.

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

iShares MBS ETF  vs.  VanEck Intermediate Muni

iShares MBS ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MBS ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, IShares MBS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

VanEck Intermediate Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Intermediate Muni has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VanEck Intermediate is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MBS and VanEck Intermediate

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

The idea behind iShares MBS ETF and VanEck Intermediate Muni 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.