Correlation Between Pace Municipal and Global Real
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Global Real 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 Global Real 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 Global Real Estate, you can compare the effects of market volatilities on Pace Municipal and Global Real 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 Global Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Global Real.
Diversification Opportunities for Pace Municipal and Global Real
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Global Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Real Estate 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 Global Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Real Estate has no effect on the direction of Pace Municipal i.e., Pace Municipal and Global Real go up and down completely randomly.
Pair Corralation between Pace Municipal and Global Real
Assuming the 90 days horizon Pace Municipal is expected to generate 2.9 times less return on investment than Global Real. But when comparing it to its historical volatility, Pace Municipal Fixed is 5.53 times less risky than Global Real. It trades about 0.07 of its potential returns per unit of risk. Global Real Estate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 854.00 in Global Real Estate on August 29, 2024 and sell it today you would earn a total of 143.00 from holding Global Real Estate or generate 16.74% 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. Global Real Estate
Performance |
| Timeline |
| Pace Municipal Fixed |
| Global Real Estate |
Pace Municipal and Global Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Global Real
The main advantage of trading using opposite Pace Municipal and Global Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Global Real 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 Global Real will offset losses from the drop in Global Real's long position.| Pace Municipal vs. HUMANA INC | Pace Municipal vs. Aquagold International | Pace Municipal vs. Barloworld Ltd ADR | Pace Municipal vs. Morningstar Unconstrained Allocation |
| Global Real vs. HUMANA INC | Global Real vs. Aquagold International | Global Real vs. Barloworld Ltd ADR | Global Real vs. Morningstar Unconstrained Allocation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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