Correlation Between American High-income and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both American High-income 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 American High-income and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American High Income Municipal and Pace Municipal Fixed, you can compare the effects of market volatilities on American High-income 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 American High-income with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Pace Municipal.
Diversification Opportunities for American High-income and Pace Municipal
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between American and Pace is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal 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 American High-income 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 American High Income Municipal 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 American High-income i.e., American High-income and Pace Municipal go up and down completely randomly.
Pair Corralation between American High-income and Pace Municipal
Assuming the 90 days horizon American High Income Municipal is expected to generate 1.55 times more return on investment than Pace Municipal. However, American High-income is 1.55 times more volatile than Pace Municipal Fixed. It trades about 0.03 of its potential returns per unit of risk. Pace Municipal Fixed is currently generating about 0.0 per unit of risk. If you would invest 1,519 in American High Income Municipal on October 21, 2024 and sell it today you would earn a total of 2.00 from holding American High Income Municipal or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American High Income Municipal vs. Pace Municipal Fixed
Performance |
| Timeline |
| American High Income |
| Pace Municipal Fixed |
American High-income and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American High-income and Pace Municipal
The main advantage of trading using opposite American High-income and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American High-income 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.| American High-income vs. Dodge Cox Stock | American High-income vs. Vest Large Cap | American High-income vs. Ab Large Cap | American High-income vs. Profunds Large Cap Growth |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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