Correlation Between Pace High and International Equity
Can any of the company-specific risk be diversified away by investing in both Pace High and International Equity 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 International Equity 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 International Equity Index, you can compare the effects of market volatilities on Pace High and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and International Equity.
Diversification Opportunities for Pace High and International Equity
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Pace and International is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Pace High i.e., Pace High and International Equity go up and down completely randomly.
Pair Corralation between Pace High and International Equity
Assuming the 90 days horizon Pace High is expected to generate 9.32 times less return on investment than International Equity. But when comparing it to its historical volatility, Pace High Yield is 3.8 times less risky than International Equity. It trades about 0.14 of its potential returns per unit of risk. International Equity Index is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,145 in International Equity Index on November 3, 2024 and sell it today you would earn a total of 61.00 from holding International Equity Index or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace High Yield vs. International Equity Index
Performance |
| Timeline |
| Pace High Yield |
| International Equity |
Pace High and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace High and International Equity
The main advantage of trading using opposite Pace High and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace High position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Pace High vs. Goldman Sachs High | Pace High vs. Barings High Yield | Pace High vs. Gugg Actv Invmt | Pace High vs. Ironclad Managed Risk |
| International Equity vs. Rmb Mendon Financial | International Equity vs. Schwab Government Money | International Equity vs. Fidelity Advisor Financial | International Equity vs. Hewitt Money Market |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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