Correlation Between IShares National and VanEck Intermediate

Can any of the company-specific risk be diversified away by investing in both IShares National 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 National 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 National Muni and VanEck Intermediate Muni, you can compare the effects of market volatilities on IShares National 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 National with a short position of VanEck Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares National and VanEck Intermediate.

Diversification Opportunities for IShares National and VanEck Intermediate

0.97

Correlation Coefficient

IShares National  VanEck Intermediate

Almost no diversification

The 3 months correlation between IShares and VanEck is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares National Muni 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 National 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 National Muni 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 National i.e., IShares National and VanEck Intermediate go up and down completely randomly.

Pair Corralation between IShares National and VanEck Intermediate

Considering the 90-day investment horizon iShares National Muni is expected to generate 1.02 times more return on investment than VanEck Intermediate. However, IShares National is 1.02 times more volatile than VanEck Intermediate Muni. It trades about -0.05 of its potential returns per unit of risk. VanEck Intermediate Muni is currently generating about -0.08 per unit of risk. If you would invest  10,603  in iShares National Muni on December 28, 2024 and sell it today you would lose (84.00) from holding iShares National Muni or give up 0.79% of portfolio value over 90 days.

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

iShares National Muni  vs.  VanEck Intermediate Muni

iShares National Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares National Muni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares National is not utilizing all of its potentials. The current 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 National and VanEck Intermediate

The main advantage of trading using opposite IShares National and VanEck Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares National 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 National Muni 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.