Correlation Between California Municipal and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both California Municipal 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 California Municipal and Pace Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Municipal Portfolio and Pace Municipal Fixed, you can compare the effects of market volatilities on California Municipal 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 California Municipal with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Pace Municipal.
Diversification Opportunities for California Municipal and Pace Municipal
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and Pace is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio 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 California 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 California Municipal Portfolio 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 California Municipal i.e., California Municipal and Pace Municipal go up and down completely randomly.
Pair Corralation between California Municipal and Pace Municipal
Assuming the 90 days horizon California Municipal Portfolio is expected to generate 0.96 times more return on investment than Pace Municipal. However, California Municipal Portfolio is 1.04 times less risky than Pace Municipal. It trades about -0.27 of its potential returns per unit of risk. Pace Municipal Fixed is currently generating about -0.31 per unit of risk. If you would invest 1,386 in California Municipal Portfolio on October 17, 2024 and sell it today you would lose (15.00) from holding California Municipal Portfolio or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
California Municipal Portfolio vs. Pace Municipal Fixed
Performance |
| Timeline |
| California Municipal |
| Pace Municipal Fixed |
California Municipal and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Municipal and Pace Municipal
The main advantage of trading using opposite California Municipal and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Municipal 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.| California Municipal vs. Americafirst Large Cap | California Municipal vs. Aqr Large Cap | California Municipal vs. Vest Large Cap | California Municipal vs. Fisher Large Cap |
| Pace Municipal vs. California Municipal Portfolio | Pace Municipal vs. Morningstar Municipal Bond | Pace Municipal vs. Dws Government Money | Pace Municipal vs. Transamerica Intermediate Muni |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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