Correlation Between Pace Municipal and Transamerica High
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Transamerica High 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 Transamerica High 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 Transamerica High Yield, you can compare the effects of market volatilities on Pace Municipal and Transamerica High 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 Transamerica High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Transamerica High.
Diversification Opportunities for Pace Municipal and Transamerica High
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Transamerica is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Transamerica High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica High Yield 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 Transamerica High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica High Yield has no effect on the direction of Pace Municipal i.e., Pace Municipal and Transamerica High go up and down completely randomly.
Pair Corralation between Pace Municipal and Transamerica High
Assuming the 90 days horizon Pace Municipal is expected to generate 3.42 times less return on investment than Transamerica High. But when comparing it to its historical volatility, Pace Municipal Fixed is 1.64 times less risky than Transamerica High. It trades about 0.04 of its potential returns per unit of risk. Transamerica High Yield is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 720.00 in Transamerica High Yield on October 11, 2024 and sell it today you would earn a total of 100.00 from holding Transamerica High Yield or generate 13.89% 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. Transamerica High Yield
Performance |
| Timeline |
| Pace Municipal Fixed |
| Transamerica High Yield |
Pace Municipal and Transamerica High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Transamerica High
The main advantage of trading using opposite Pace Municipal and Transamerica High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Transamerica High 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 Transamerica High will offset losses from the drop in Transamerica High's long position.| Pace Municipal vs. Artisan Small Cap | Pace Municipal vs. Franklin Small Cap | Pace Municipal vs. Praxis Small Cap | Pace Municipal vs. Lebenthal Lisanti Small |
| Transamerica High vs. Pioneer Amt Free Municipal | Transamerica High vs. Oklahoma Municipal Fund | Transamerica High vs. Franklin Government Money | Transamerica High 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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