Correlation Between Pace Large and Investment Managers

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

By analyzing existing cross correlation between Pace Large Growth and Investment Managers Series, you can compare the effects of market volatilities on Pace Large and Investment Managers 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 Large with a short position of Investment Managers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and Investment Managers.

Diversification Opportunities for Pace Large and Investment Managers

0.84

Correlation Coefficient

Pace Large  Investment Managers

Very poor diversification

The 3 months correlation between Pace and Investment is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Growth and Investment Managers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Managers and Pace Large 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 Large Growth are associated (or correlated) with Investment Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Managers has no effect on the direction of Pace Large i.e., Pace Large and Investment Managers go up and down completely randomly.

Pair Corralation between Pace Large and Investment Managers

Assuming the 90 days horizon Pace Large Growth is expected to under-perform the Investment Managers. But the mutual fund apears to be less risky and, when comparing its historical volatility, Pace Large Growth is 1.06 times less risky than Investment Managers. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Investment Managers Series is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,425  in Investment Managers Series on December 29, 2024 and sell it today you would lose (33.00) from holding Investment Managers Series or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Pace Large Growth  vs.  Investment Managers Series

Pace Large Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace Large Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Investment Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Investment Managers Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Investment Managers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pace Large and Investment Managers

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

The idea behind Pace Large Growth and Investment Managers Series 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.