Correlation Between Pace Municipal and Consumer Services
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Consumer Services 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 Municipal and Consumer Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Municipal Fixed and Consumer Services Ultrasector, you can compare the effects of market volatilities on Pace Municipal and Consumer Services 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 Municipal with a short position of Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Consumer Services.
Diversification Opportunities for Pace Municipal and Consumer Services
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pace and Consumer is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services and Pace Municipal 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 Municipal Fixed are associated (or correlated) with Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Pace Municipal i.e., Pace Municipal and Consumer Services go up and down completely randomly.
Pair Corralation between Pace Municipal and Consumer Services
Assuming the 90 days horizon Pace Municipal is expected to generate 8.59 times less return on investment than Consumer Services. But when comparing it to its historical volatility, Pace Municipal Fixed is 9.97 times less risky than Consumer Services. It trades about 0.13 of its potential returns per unit of risk. Consumer Services Ultrasector is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,070 in Consumer Services Ultrasector on September 14, 2024 and sell it today you would earn a total of 2,905 from holding Consumer Services Ultrasector or generate 57.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Municipal Fixed vs. Consumer Services Ultrasector
Performance |
| Timeline |
| Pace Municipal Fixed |
| Consumer Services |
Pace Municipal and Consumer Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Consumer Services
The main advantage of trading using opposite Pace Municipal and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Consumer Services 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 Consumer Services will offset losses from the drop in Consumer Services' long position.| Pace Municipal vs. Ishares Municipal Bond | Pace Municipal vs. Dws Government Money | Pace Municipal vs. Oklahoma Municipal Fund | Pace Municipal vs. Old Westbury Municipal |
| Consumer Services vs. Franklin High Yield | Consumer Services vs. Blrc Sgy Mnp | Consumer Services vs. Pace Municipal Fixed | Consumer Services vs. Baird Strategic Municipal |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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