Correlation Between California Bond and Pace Municipal
Can any of the company-specific risk be diversified away by investing in both California Bond 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 Bond 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 Bond Fund and Pace Municipal Fixed, you can compare the effects of market volatilities on California Bond 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 Bond with a short position of Pace Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Pace Municipal.
Diversification Opportunities for California Bond and Pace Municipal
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and PACE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding California Bond 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 California Bond 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 Bond 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 California Bond i.e., California Bond and Pace Municipal go up and down completely randomly.
Pair Corralation between California Bond and Pace Municipal
Assuming the 90 days horizon California Bond Fund is expected to generate 1.41 times more return on investment than Pace Municipal. However, California Bond is 1.41 times more volatile than Pace Municipal Fixed. It trades about 0.21 of its potential returns per unit of risk. Pace Municipal Fixed is currently generating about 0.08 per unit of risk. If you would invest 1,032 in California Bond Fund on August 29, 2024 and sell it today you would earn a total of 16.00 from holding California Bond Fund or generate 1.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Pace Municipal Fixed
Performance |
| Timeline |
| California Bond |
| Pace Municipal Fixed |
California Bond and Pace Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Pace Municipal
The main advantage of trading using opposite California Bond and Pace Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond 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 Bond vs. Maryland Short Term Tax Free | California Bond vs. Angel Oak Ultrashort | California Bond vs. Barings Active Short | California Bond vs. Touchstone Ultra Short |
| Pace Municipal vs. Pimco Diversified Income | Pace Municipal vs. Massmutual Premier Diversified | Pace Municipal vs. Huber Capital Diversified | Pace Municipal vs. Western Asset Diversified |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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