Correlation Between Pace Small/medium and Pace Strategic

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

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

Diversification Opportunities for Pace Small/medium and Pace Strategic

-0.58

Correlation Coefficient

Pace Small/medium  Pace Strategic

Excellent diversification

The 3 months correlation between Pace and Pace is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Value and Pace Strategic Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Strategic Fixed and Pace Small/medium 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 Smallmedium Value are associated (or correlated) with Pace Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Strategic Fixed has no effect on the direction of Pace Small/medium i.e., Pace Small/medium and Pace Strategic go up and down completely randomly.

Pair Corralation between Pace Small/medium and Pace Strategic

Assuming the 90 days horizon Pace Smallmedium Value is expected to under-perform the Pace Strategic. In addition to that, Pace Small/medium is 3.93 times more volatile than Pace Strategic Fixed. It trades about -0.07 of its total potential returns per unit of risk. Pace Strategic Fixed is currently generating about 0.09 per unit of volatility. If you would invest  1,157  in Pace Strategic Fixed on December 28, 2024 and sell it today you would earn a total of  16.00  from holding Pace Strategic Fixed or generate 1.38% return on investment over 90 days.

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

Pace Smallmedium Value  vs.  Pace Strategic Fixed

Pace Smallmedium Value

Risk-Adjusted Performance

Very Weak

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

Pace Strategic Fixed

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Strategic Fixed 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 Strategic 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 Small/medium and Pace Strategic

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

The idea behind Pace Smallmedium Value and Pace Strategic Fixed 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.