Correlation Between Pace Municipal and Highland Merger
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Highland Merger 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 Highland Merger 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 Highland Merger Arbitrage, you can compare the effects of market volatilities on Pace Municipal and Highland Merger 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 Highland Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Highland Merger.
Diversification Opportunities for Pace Municipal and Highland Merger
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pace and Highland is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Highland Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Merger Arbitrage 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 Highland Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Merger Arbitrage has no effect on the direction of Pace Municipal i.e., Pace Municipal and Highland Merger go up and down completely randomly.
Pair Corralation between Pace Municipal and Highland Merger
Assuming the 90 days horizon Pace Municipal is expected to generate 4.69 times less return on investment than Highland Merger. In addition to that, Pace Municipal is 1.7 times more volatile than Highland Merger Arbitrage. It trades about 0.03 of its total potential returns per unit of risk. Highland Merger Arbitrage is currently generating about 0.27 per unit of volatility. If you would invest 1,813 in Highland Merger Arbitrage on October 24, 2024 and sell it today you would earn a total of 128.00 from holding Highland Merger Arbitrage or generate 7.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Pace Municipal Fixed vs. Highland Merger Arbitrage
Performance |
| Timeline |
| Pace Municipal Fixed |
| Highland Merger Arbitrage |
Pace Municipal and Highland Merger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Highland Merger
The main advantage of trading using opposite Pace Municipal and Highland Merger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Highland Merger 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 Highland Merger will offset losses from the drop in Highland Merger's long position.| Pace Municipal vs. Blackrock Health Sciences | Pace Municipal vs. Health Care Ultrasector | Pace Municipal vs. Tekla Healthcare Investors | Pace Municipal vs. Vanguard Health Care |
| Highland Merger vs. Old Westbury Municipal | Highland Merger vs. Georgia Tax Free Bond | Highland Merger vs. T Rowe Price | Highland Merger vs. Pace Municipal Fixed |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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