Correlation Between World Energy and Pace International
Can any of the company-specific risk be diversified away by investing in both World Energy and Pace International 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 International 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 International Emerging, you can compare the effects of market volatilities on World Energy and Pace International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Pace International.
Diversification Opportunities for World Energy and Pace International
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between World and Pace is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Pace International Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International has no effect on the direction of World Energy i.e., World Energy and Pace International go up and down completely randomly.
Pair Corralation between World Energy and Pace International
Assuming the 90 days horizon World Energy Fund is expected to under-perform the Pace International. In addition to that, World Energy is 1.65 times more volatile than Pace International Emerging. It trades about -0.23 of its total potential returns per unit of risk. Pace International Emerging is currently generating about -0.13 per unit of volatility. If you would invest 1,336 in Pace International Emerging on September 28, 2024 and sell it today you would lose (26.00) from holding Pace International Emerging or give up 1.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Pace International Emerging
Performance |
| Timeline |
| World Energy |
| Pace International |
World Energy and Pace International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Pace International
The main advantage of trading using opposite World Energy and Pace International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Pace International 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 International will offset losses from the drop in Pace International's long position.| World Energy vs. Real Estate Ultrasector | World Energy vs. Neuberger Berman Real | World Energy vs. Redwood Real Estate | World Energy vs. Forum Real Estate |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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