Correlation Between Small Pany and Pace High

Can any of the company-specific risk be diversified away by investing in both Small Pany and Pace High 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 Small Pany and Pace High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Pany Fund and Pace High Yield, you can compare the effects of market volatilities on Small Pany and Pace High 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 Small Pany with a short position of Pace High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Pany and Pace High.

Diversification Opportunities for Small Pany and Pace High

0.87

Correlation Coefficient

Small Pany  Pace High

Very poor diversification

The 3 months correlation between Small and Pace is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Fund and Pace High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace High Yield and Small Pany 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 Small Pany Fund are associated (or correlated) with Pace High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace High Yield has no effect on the direction of Small Pany i.e., Small Pany and Pace High go up and down completely randomly.

Pair Corralation between Small Pany and Pace High

Assuming the 90 days horizon Small Pany Fund is expected to generate 10.64 times more return on investment than Pace High. However, Small Pany is 10.64 times more volatile than Pace High Yield. It trades about 0.11 of its potential returns per unit of risk. Pace High Yield is currently generating about 0.32 per unit of risk. If you would invest  1,622  in Small Pany Fund on September 13, 2024 and sell it today you would earn a total of  133.00  from holding Small Pany Fund or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Small Pany Fund  vs.  Pace High Yield

Small Pany Fund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Pany may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pace High Yield

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pace High Yield are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Pany and Pace High

The main advantage of trading using opposite Small Pany and Pace High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Pany position performs unexpectedly, Pace High 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 High will offset losses from the drop in Pace High's long position.

The idea behind Small Pany Fund and Pace High Yield 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.