Correlation Between Pace International and Materials Portfolio
Can any of the company-specific risk be diversified away by investing in both Pace International and Materials Portfolio 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 Pace International and Materials Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace International Emerging and Materials Portfolio Fidelity, you can compare the effects of market volatilities on Pace International and Materials Portfolio 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 Pace International with a short position of Materials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace International and Materials Portfolio.
Diversification Opportunities for Pace International and Materials Portfolio
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pace and Materials is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Emerging and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Pace International 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 Pace International Emerging are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Pace International i.e., Pace International and Materials Portfolio go up and down completely randomly.
Pair Corralation between Pace International and Materials Portfolio
Assuming the 90 days horizon Pace International Emerging is expected to generate 0.84 times more return on investment than Materials Portfolio. However, Pace International Emerging is 1.19 times less risky than Materials Portfolio. It trades about -0.12 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about -0.54 per unit of risk. If you would invest 1,336 in Pace International Emerging on September 27, 2024 and sell it today you would lose (25.00) from holding Pace International Emerging or give up 1.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace International Emerging vs. Materials Portfolio Fidelity
Performance |
| Timeline |
| Pace International |
| Materials Portfolio |
Pace International and Materials Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace International and Materials Portfolio
The main advantage of trading using opposite Pace International and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International position performs unexpectedly, Materials Portfolio 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 Materials Portfolio will offset losses from the drop in Materials Portfolio's long position.| Pace International vs. World Energy Fund | Pace International vs. Thrivent Natural Resources | Pace International vs. Gmo Resources | Pace International vs. Energy Basic Materials |
| Materials Portfolio vs. Rbc Emerging Markets | Materials Portfolio vs. Transamerica Emerging Markets | Materials Portfolio vs. Ep Emerging Markets | Materials Portfolio vs. Pace International Emerging |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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