Correlation Between Pace Municipal and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Old Westbury 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 Old Westbury 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 Old Westbury Municipal, you can compare the effects of market volatilities on Pace Municipal and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Old Westbury.
Diversification Opportunities for Pace Municipal and Old Westbury
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Old is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal 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 Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of Pace Municipal i.e., Pace Municipal and Old Westbury go up and down completely randomly.
Pair Corralation between Pace Municipal and Old Westbury
Assuming the 90 days horizon Pace Municipal Fixed is expected to generate 1.04 times more return on investment than Old Westbury. However, Pace Municipal is 1.04 times more volatile than Old Westbury Municipal. It trades about 0.05 of its potential returns per unit of risk. Old Westbury Municipal is currently generating about 0.04 per unit of risk. If you would invest 1,165 in Pace Municipal Fixed on November 2, 2024 and sell it today you would earn a total of 51.00 from holding Pace Municipal Fixed or generate 4.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Municipal Fixed vs. Old Westbury Municipal
Performance |
| Timeline |
| Pace Municipal Fixed |
| Old Westbury Municipal |
Pace Municipal and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Old Westbury
The main advantage of trading using opposite Pace Municipal and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| Pace Municipal vs. Growth Portfolio Class | Pace Municipal vs. Tax Managed Large Cap | Pace Municipal vs. Federated Emerging Market | Pace Municipal vs. Commonwealth Global Fund |
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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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