Correlation Between Pace High and Bridge Builder
Can any of the company-specific risk be diversified away by investing in both Pace High and Bridge Builder 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 High and Bridge Builder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace High Yield and Bridge Builder Large, you can compare the effects of market volatilities on Pace High and Bridge Builder 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 High with a short position of Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and Bridge Builder.
Diversification Opportunities for Pace High and Bridge Builder
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pace and Bridge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield and Bridge Builder Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder Large and Pace High 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 High Yield are associated (or correlated) with Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder Large has no effect on the direction of Pace High i.e., Pace High and Bridge Builder go up and down completely randomly.
Pair Corralation between Pace High and Bridge Builder
Assuming the 90 days horizon Pace High is expected to generate 1.96 times less return on investment than Bridge Builder. But when comparing it to its historical volatility, Pace High Yield is 5.61 times less risky than Bridge Builder. It trades about 0.27 of its potential returns per unit of risk. Bridge Builder Large is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,449 in Bridge Builder Large on September 4, 2024 and sell it today you would earn a total of 340.00 from holding Bridge Builder Large or generate 13.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
Pace High Yield vs. Bridge Builder Large
Performance |
| Timeline |
| Pace High Yield |
| Bridge Builder Large |
Pace High and Bridge Builder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace High and Bridge Builder
The main advantage of trading using opposite Pace High and Bridge Builder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace High position performs unexpectedly, Bridge Builder 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 Bridge Builder will offset losses from the drop in Bridge Builder's long position.| Pace High vs. Pace International Equity | Pace High vs. Pace International Equity | Pace High vs. Ubs Allocation Fund | Pace High vs. Ubs Allocation Fund |
| Bridge Builder vs. Allianzgi Technology Fund | Bridge Builder vs. Biotechnology Ultrasector Profund | Bridge Builder vs. Pgim Jennison Technology | Bridge Builder vs. Columbia Global Technology |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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