Correlation Between Pace Municipal and Bdvex

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

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

Diversification Opportunities for Pace Municipal and Bdvex

0.62

Correlation Coefficient

Pace Municipal  Bdvex

Poor diversification

The 3 months correlation between Pace and Bdvex is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Bdvex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bdvex and Pace Municipal 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 Municipal Fixed are associated (or correlated) with Bdvex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bdvex has no effect on the direction of Pace Municipal i.e., Pace Municipal and Bdvex go up and down completely randomly.

Pair Corralation between Pace Municipal and Bdvex

Assuming the 90 days horizon Pace Municipal is expected to generate 42.22 times less return on investment than Bdvex. But when comparing it to its historical volatility, Pace Municipal Fixed is 45.39 times less risky than Bdvex. It trades about 0.06 of its potential returns per unit of risk. Bdvex is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  949.00  in Bdvex on October 22, 2024 and sell it today you would earn a total of  331.00  from holding Bdvex or generate 34.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.42%
Values	Daily Returns

Pace Municipal Fixed  vs.  Bdvex

Pace Municipal Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bdvex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bdvex has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Bdvex 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 Municipal and Bdvex

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

The idea behind Pace Municipal Fixed and Bdvex 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.