Correlation Between Pace Municipal and Pace International
Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Pace International 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 Pace International 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 Pace International Equity, you can compare the effects of market volatilities on Pace Municipal and Pace International 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 Pace International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Pace International.
Diversification Opportunities for Pace Municipal and Pace International
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pace and Pace is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Pace International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace International Equity 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 Pace International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace International Equity has no effect on the direction of Pace Municipal i.e., Pace Municipal and Pace International go up and down completely randomly.
Pair Corralation between Pace Municipal and Pace International
Assuming the 90 days horizon Pace Municipal is expected to generate 3.23 times less return on investment than Pace International. But when comparing it to its historical volatility, Pace Municipal Fixed is 3.99 times less risky than Pace International. It trades about 0.09 of its potential returns per unit of risk. Pace International Equity is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,580 in Pace International Equity on August 29, 2024 and sell it today you would earn a total of 267.00 from holding Pace International Equity or generate 16.9% 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. Pace International Equity
Performance |
| Timeline |
| Pace Municipal Fixed |
| Pace International Equity |
Pace Municipal and Pace International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Municipal and Pace International
The main advantage of trading using opposite Pace Municipal and Pace International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Municipal position performs unexpectedly, Pace International 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 Pace International will offset losses from the drop in Pace International's long position.| Pace Municipal vs. Legg Mason Partners | Pace Municipal vs. Artisan Emerging Markets | Pace Municipal vs. Touchstone Sands Capital | Pace Municipal vs. T Rowe Price |
| Pace International vs. Pace Large Growth | Pace International vs. Pace Large Value | Pace International vs. Pace Smallmedium Growth | Pace International vs. Pace Smallmedium Value |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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