Correlation Between Pace Municipal and Western Asset
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Western Asset 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 Western Asset 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 Western Asset Inflation, you can compare the effects of market volatilities on Pace Municipal and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Western Asset.
Diversification Opportunities for Pace Municipal and Western Asset
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Western is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of Pace Municipal i.e., Pace Municipal and Western Asset go up and down completely randomly.
Pair Corralation between Pace Municipal and Western Asset
Assuming the 90 days horizon Pace Municipal Fixed is expected to generate 0.74 times more return on investment than Western Asset. However, Pace Municipal Fixed is 1.34 times less risky than Western Asset. It trades about -0.15 of its potential returns per unit of risk. Western Asset Inflation is currently generating about -0.22 per unit of risk. If you would invest 1,218 in Pace Municipal Fixed on September 22, 2024 and sell it today you would lose (9.00) from holding Pace Municipal Fixed or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace Municipal Fixed vs. Western Asset Inflation
Performance |
| Timeline |
| Pace Municipal Fixed |
| Western Asset Inflation |
Pace Municipal and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Western Asset
The main advantage of trading using opposite Pace Municipal and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Pace Municipal vs. Transamerica Emerging Markets | Pace Municipal vs. Artisan Emerging Markets | Pace Municipal vs. Ep Emerging Markets | Pace Municipal vs. Black Oak Emerging |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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