Correlation Between Ishares Municipal and Hotchkis Wiley

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

Diversification Opportunities for Ishares Municipal and Hotchkis Wiley

-0.08

Correlation Coefficient

Ishares Municipal  Hotchkis Wiley

Good diversification

The 3 months correlation between Ishares and Hotchkis is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and Hotchkis Wiley Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Small 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 Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Small has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Ishares Municipal and Hotchkis Wiley

Assuming the 90 days horizon Ishares Municipal is expected to generate 4.69 times less return on investment than Hotchkis Wiley. But when comparing it to its historical volatility, Ishares Municipal Bond is 4.43 times less risky than Hotchkis Wiley. It trades about 0.21 of its potential returns per unit of risk. Hotchkis Wiley Small is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  8,054  in Hotchkis Wiley Small on September 5, 2024 and sell it today you would earn a total of  539.00  from holding Hotchkis Wiley Small or generate 6.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Ishares Municipal Bond  vs.  Hotchkis Wiley Small

Ishares Municipal Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Municipal Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Ishares Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hotchkis Wiley Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hotchkis Wiley Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hotchkis Wiley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ishares Municipal and Hotchkis Wiley

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

The idea behind Ishares Municipal Bond and Hotchkis Wiley Small 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.