Correlation Between Pace Large and Tax-managed

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

By analyzing existing cross correlation between Pace Large Value and Tax Managed Large Cap, you can compare the effects of market volatilities on Pace Large and Tax-managed 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 Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and Tax-managed.

Diversification Opportunities for Pace Large and Tax-managed

0.12

Correlation Coefficient

Pace Large  Tax-managed

Average diversification

The 3 months correlation between Pace and Tax-managed is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Tax Managed Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Large 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 Value are associated (or correlated) with Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Large has no effect on the direction of Pace Large i.e., Pace Large and Tax-managed go up and down completely randomly.

Pair Corralation between Pace Large and Tax-managed

Assuming the 90 days horizon Pace Large Value is expected to generate 0.77 times more return on investment than Tax-managed. However, Pace Large Value is 1.31 times less risky than Tax-managed. It trades about 0.09 of its potential returns per unit of risk. Tax Managed Large Cap is currently generating about -0.09 per unit of risk. If you would invest  2,013  in Pace Large Value on December 30, 2024 and sell it today you would earn a total of  80.00  from holding Pace Large Value or generate 3.97% return on investment over 90 days.

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

Pace Large Value  vs.  Tax Managed Large Cap

Pace Large Value

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Large Value are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tax Managed Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tax Managed Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Tax-managed 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 Tax-managed

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

The idea behind Pace Large Value and Tax Managed Large Cap 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..