Correlation Between Pace Municipal and American Funds
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and American Funds 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 American Funds 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 American Funds Strategic, you can compare the effects of market volatilities on Pace Municipal and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and American Funds.
Diversification Opportunities for Pace Municipal and American Funds
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and American Funds Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Strategic 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Strategic has no effect on the direction of Pace Municipal i.e., Pace Municipal and American Funds go up and down completely randomly.
Pair Corralation between Pace Municipal and American Funds
Assuming the 90 days horizon Pace Municipal Fixed is expected to generate 0.69 times more return on investment than American Funds. However, Pace Municipal Fixed is 1.45 times less risky than American Funds. It trades about 0.11 of its potential returns per unit of risk. American Funds Strategic is currently generating about -0.01 per unit of risk. If you would invest 1,213 in Pace Municipal Fixed on August 30, 2024 and sell it today you would earn a total of 7.00 from holding Pace Municipal Fixed or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pace Municipal Fixed vs. American Funds Strategic
Performance |
| Timeline |
| Pace Municipal Fixed |
| American Funds Strategic |
Pace Municipal and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and American Funds
The main advantage of trading using opposite Pace Municipal and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Pace Municipal vs. Pace Smallmedium Value | Pace Municipal vs. Pace International Equity | Pace Municipal vs. Pace International Equity | Pace Municipal vs. Ubs Allocation Fund |
| American Funds vs. Calvert Short Duration | American Funds vs. Angel Oak Ultrashort | American Funds vs. Rbc Ultra Short Fixed | American Funds vs. Ab Select Longshort |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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