Correlation Between Pace Municipal and State Street
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and State Street 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 State Street 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 State Street Target, you can compare the effects of market volatilities on Pace Municipal and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and State Street.
Diversification Opportunities for Pace Municipal and State Street
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pace and State is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Pace Municipal i.e., Pace Municipal and State Street go up and down completely randomly.
Pair Corralation between Pace Municipal and State Street
Assuming the 90 days horizon Pace Municipal is expected to generate 1.12 times less return on investment than State Street. But when comparing it to its historical volatility, Pace Municipal Fixed is 2.19 times less risky than State Street. It trades about 0.44 of its potential returns per unit of risk. State Street Target is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,277 in State Street Target on September 13, 2024 and sell it today you would earn a total of 16.00 from holding State Street Target or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Pace Municipal Fixed vs. State Street Target
Performance |
| Timeline |
| Pace Municipal Fixed |
| State Street Target |
Pace Municipal and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and State Street
The main advantage of trading using opposite Pace Municipal and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Pace Municipal vs. Multisector Bond Sma | Pace Municipal vs. Franklin High Yield | Pace Municipal vs. Touchstone Premium Yield | Pace Municipal vs. Western Asset Municipal |
| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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