Correlation Between Pace International and Pace Large
Can any of the company-specific risk be diversified away by investing in both Pace International and Pace Large 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 International and Pace Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace International Equity and Pace Large Value, you can compare the effects of market volatilities on Pace International and Pace Large 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 International with a short position of Pace Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace International and Pace Large.
Diversification Opportunities for Pace International and Pace Large
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pace and PACE is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pace International Equity and Pace Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Value and Pace International 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 International Equity are associated (or correlated) with Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Value has no effect on the direction of Pace International i.e., Pace International and Pace Large go up and down completely randomly.
Pair Corralation between Pace International and Pace Large
Assuming the 90 days horizon Pace International Equity is expected to under-perform the Pace Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pace International Equity is 1.24 times less risky than Pace Large. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Pace Large Value is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,255 in Pace Large Value on August 30, 2024 and sell it today you would earn a total of 92.00 from holding Pace Large Value or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pace International Equity vs. Pace Large Value
Performance |
| Timeline |
| Pace International Equity |
| Pace Large Value |
Pace International and Pace Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace International and Pace Large
The main advantage of trading using opposite Pace International and Pace Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace International position performs unexpectedly, Pace Large 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 Large will offset losses from the drop in Pace Large's long position.The idea behind Pace International Equity and Pace Large Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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