Correlation Between The National and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both The National 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 The National and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The National Tax Free and Pace Municipal Fixed, you can compare the effects of market volatilities on The National 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 The National with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of The National and Pace Municipal.
Diversification Opportunities for The National and Pace Municipal
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between THE and Pace is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free 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 The National 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 The National Tax Free 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 The National i.e., The National and Pace Municipal go up and down completely randomly.
Pair Corralation between The National and Pace Municipal
Assuming the 90 days horizon The National Tax Free is expected to generate 1.1 times more return on investment than Pace Municipal. However, The National is 1.1 times more volatile than Pace Municipal Fixed. It trades about 0.14 of its potential returns per unit of risk. Pace Municipal Fixed is currently generating about 0.14 per unit of risk. If you would invest 1,721 in The National Tax Free on August 25, 2024 and sell it today you would earn a total of 145.00 from holding The National Tax Free or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The National Tax Free vs. Pace Municipal Fixed
Performance |
| Timeline |
| National Tax |
| Pace Municipal Fixed |
The National and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The National and Pace Municipal
The main advantage of trading using opposite The National and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The National 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.| The National vs. The Missouri Tax Free | The National vs. The Bond Fund | The National vs. High Yield Municipal Fund | The National vs. Fidelity Intermediate Municipal |
| Pace Municipal vs. Fidelity Advisor Diversified | Pace Municipal vs. Pgim Conservative Retirement | Pace Municipal vs. Massmutual Premier Diversified | Pace Municipal vs. Huber Capital Diversified |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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