Correlation Between Tax Exempt and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both Tax Exempt and Pace Municipal 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 Tax Exempt and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Exempt Bond and Pace Municipal Fixed, you can compare the effects of market volatilities on Tax Exempt and Pace Municipal 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 Tax Exempt with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Exempt and Pace Municipal.
Diversification Opportunities for Tax Exempt and Pace Municipal
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tax and Pace is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Tax Exempt Bond and Pace Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Municipal Fixed and Tax Exempt 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 Tax Exempt Bond are associated (or correlated) with Pace Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Municipal Fixed has no effect on the direction of Tax Exempt i.e., Tax Exempt and Pace Municipal go up and down completely randomly.
Pair Corralation between Tax Exempt and Pace Municipal
Assuming the 90 days horizon Tax Exempt Bond is expected to generate 1.12 times more return on investment than Pace Municipal. However, Tax Exempt is 1.12 times more volatile than Pace Municipal Fixed. It trades about 0.11 of its potential returns per unit of risk. Pace Municipal Fixed is currently generating about 0.06 per unit of risk. If you would invest 1,241 in Tax Exempt Bond on August 27, 2024 and sell it today you would earn a total of 8.00 from holding Tax Exempt Bond or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Exempt Bond vs. Pace Municipal Fixed
Performance |
| Timeline |
| Tax Exempt Bond |
| Pace Municipal Fixed |
Tax Exempt and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax Exempt and Pace Municipal
The main advantage of trading using opposite Tax Exempt and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Exempt position performs unexpectedly, Pace Municipal 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 Pace Municipal will offset losses from the drop in Pace Municipal's long position.| Tax Exempt vs. Franklin Federal Tax Free | Tax Exempt vs. Thornburg Limited Term | Tax Exempt vs. T Rowe Price | Tax Exempt vs. Invesco International Growth |
| Pace Municipal vs. Pace International Equity | Pace Municipal vs. Ubs Allocation Fund | Pace Municipal vs. Ubs Allocation Fund | Pace Municipal vs. Pace Mortgage Backed Securities |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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