Correlation Between Pace High and Real Assets

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

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

Diversification Opportunities for Pace High and Real Assets

-0.39

Correlation Coefficient

Pace High  Real Assets

Very good diversification

The 3 months correlation between Pace and Real is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield and Real Assets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Assets Portfolio and Pace High 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 High Yield are associated (or correlated) with Real Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Assets Portfolio has no effect on the direction of Pace High i.e., Pace High and Real Assets go up and down completely randomly.

Pair Corralation between Pace High and Real Assets

Assuming the 90 days horizon Pace High Yield is expected to generate 0.09 times more return on investment than Real Assets. However, Pace High Yield is 11.71 times less risky than Real Assets. It trades about -0.15 of its potential returns per unit of risk. Real Assets Portfolio is currently generating about -0.32 per unit of risk. If you would invest  895.00  in Pace High Yield on September 22, 2024 and sell it today you would lose (5.00) from holding Pace High Yield or give up 0.56% of portfolio value over 90 days.

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

Pace High Yield  vs.  Real Assets Portfolio

Pace High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Real Assets Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Pace High and Real Assets

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

The idea behind Pace High Yield and Real Assets Portfolio 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.