Correlation Between World Energy and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both World Energy 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 World Energy and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Pace Municipal Fixed, you can compare the effects of market volatilities on World Energy 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 World Energy with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Pace Municipal.
Diversification Opportunities for World Energy and Pace Municipal
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between World and Pace is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund 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 World Energy 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 World Energy Fund 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 World Energy i.e., World Energy and Pace Municipal go up and down completely randomly.
Pair Corralation between World Energy and Pace Municipal
Assuming the 90 days horizon World Energy Fund is expected to generate 5.4 times more return on investment than Pace Municipal. However, World Energy is 5.4 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 -0.33 per unit of risk. If you would invest 1,469 in World Energy Fund on October 16, 2024 and sell it today you would earn a total of 32.00 from holding World Energy Fund or generate 2.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Pace Municipal Fixed
Performance |
| Timeline |
| World Energy |
| Pace Municipal Fixed |
World Energy and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Pace Municipal
The main advantage of trading using opposite World Energy and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy 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.| World Energy vs. Old Westbury Large | World Energy vs. Artisan Global Opportunities | World Energy vs. Transamerica Asset Allocation | World Energy vs. Rbb Fund Trust |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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