Correlation Between Pace Municipal and Pro Blend

Can any of the company-specific risk be diversified away by investing in both Pace Municipal and Pro Blend 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 Pro Blend 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 Pro Blend Maximum Term, you can compare the effects of market volatilities on Pace Municipal and Pro Blend 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 Pro Blend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Municipal and Pro Blend.

Diversification Opportunities for Pace Municipal and Pro Blend

0.45

Correlation Coefficient

Pace Municipal  Pro Blend

Very weak diversification

The 3 months correlation between Pace and Pro is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pace Municipal Fixed and Pro Blend Maximum Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Blend Maximum 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 Pro Blend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Blend Maximum has no effect on the direction of Pace Municipal i.e., Pace Municipal and Pro Blend go up and down completely randomly.

Pair Corralation between Pace Municipal and Pro Blend

Assuming the 90 days horizon Pace Municipal is expected to generate 2.4 times less return on investment than Pro Blend. But when comparing it to its historical volatility, Pace Municipal Fixed is 3.97 times less risky than Pro Blend. It trades about 0.1 of its potential returns per unit of risk. Pro Blend Maximum Term is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,244  in Pro Blend Maximum Term on October 11, 2024 and sell it today you would earn a total of  261.00  from holding Pro Blend Maximum Term or generate 11.63% return on investment over 90 days.

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

Pace Municipal Fixed  vs.  Pro Blend Maximum Term

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.

Pro Blend Maximum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pro Blend Maximum Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Pro Blend 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 Pro Blend

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

The idea behind Pace Municipal Fixed and Pro Blend Maximum Term 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.