Correlation Between Ishares Municipal and James Alpha

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

Diversification Opportunities for Ishares Municipal and James Alpha

0.05

Correlation Coefficient

Ishares Municipal  James Alpha

Significant diversification

The 3 months correlation between Ishares and James is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond and James Alpha Structured in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Alpha Structured 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 James Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Alpha Structured has no effect on the direction of Ishares Municipal i.e., Ishares Municipal and James Alpha go up and down completely randomly.

Pair Corralation between Ishares Municipal and James Alpha

Assuming the 90 days horizon Ishares Municipal is expected to generate 1.97 times less return on investment than James Alpha. In addition to that, Ishares Municipal is 1.51 times more volatile than James Alpha Structured. It trades about 0.06 of its total potential returns per unit of risk. James Alpha Structured is currently generating about 0.18 per unit of volatility. If you would invest  881.00  in James Alpha Structured on September 20, 2024 and sell it today you would earn a total of  133.00  from holding James Alpha Structured or generate 15.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Ishares Municipal Bond  vs.  James Alpha Structured

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.

James Alpha Structured

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in James Alpha Structured are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, James Alpha 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 James Alpha

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

The idea behind Ishares Municipal Bond and James Alpha Structured 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.