Correlation Between Preferred Securities and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both Preferred Securities and Pace Municipal 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 Preferred Securities and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preferred Securities Fund and Pace Municipal Fixed, you can compare the effects of market volatilities on Preferred Securities and Pace Municipal 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 Preferred Securities with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Securities and Pace Municipal.
Diversification Opportunities for Preferred Securities and Pace Municipal
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Preferred and Pace is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Securities Fund and Pace Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Municipal Fixed and Preferred Securities 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 Preferred Securities Fund are associated (or correlated) with Pace Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Municipal Fixed has no effect on the direction of Preferred Securities i.e., Preferred Securities and Pace Municipal go up and down completely randomly.
Pair Corralation between Preferred Securities and Pace Municipal
Assuming the 90 days horizon Preferred Securities Fund is expected to under-perform the Pace Municipal. But the mutual fund apears to be less risky and, when comparing its historical volatility, Preferred Securities Fund is 1.58 times less risky than Pace Municipal. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Pace Municipal Fixed is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,214 in Pace Municipal Fixed on August 31, 2024 and sell it today you would earn a total of 11.00 from holding Pace Municipal Fixed or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Preferred Securities Fund vs. Pace Municipal Fixed
Performance |
| Timeline |
| Preferred Securities |
| Pace Municipal Fixed |
Preferred Securities and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Preferred Securities and Pace Municipal
The main advantage of trading using opposite Preferred Securities and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Securities position performs unexpectedly, Pace Municipal 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 Municipal will offset losses from the drop in Pace Municipal's long position.| Preferred Securities vs. Pace Municipal Fixed | Preferred Securities vs. Ishares Municipal Bond | Preferred Securities vs. T Rowe Price | Preferred Securities vs. Oklahoma Municipal Fund |
| Pace Municipal vs. Vanguard Intermediate Term Tax Exempt | Pace Municipal vs. Vanguard Intermediate Term Tax Exempt | Pace Municipal vs. Tax Exempt Bond | Pace Municipal vs. Tax Exempt Bond |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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