Correlation Between Extended Market and Pace Large
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Pace Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Pace Large Growth, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Pace Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Pace Large.
Diversification Opportunities for Extended Market and Pace Large
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and Pace is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Pace Large Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Growth and Extended Market 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 Extended Market Index 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 Growth has no effect on the direction of Extended Market i.e., Extended Market and Pace Large go up and down completely randomly.
Pair Corralation between Extended Market and Pace Large
Assuming the 90 days horizon Extended Market is expected to generate 1.98 times less return on investment than Pace Large. In addition to that, Extended Market is 1.11 times more volatile than Pace Large Growth. It trades about 0.05 of its total potential returns per unit of risk. Pace Large Growth is currently generating about 0.12 per unit of volatility. If you would invest 1,764 in Pace Large Growth on September 13, 2024 and sell it today you would earn a total of 33.00 from holding Pace Large Growth or generate 1.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Pace Large Growth
Performance |
| Timeline |
| Extended Market Index |
| Pace Large Growth |
Extended Market and Pace Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Pace Large
The main advantage of trading using opposite Extended Market and Pace Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Multimedia Portfolio Multimedia | Extended Market vs. Artisan Select Equity | Extended Market vs. Touchstone International Equity | Extended Market vs. Qs Global Equity |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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