Correlation Between Pace Small/medium and Gateway Fund

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

By analyzing existing cross correlation between Pace Smallmedium Growth and Gateway Fund Class, you can compare the effects of market volatilities on Pace Small/medium and Gateway Fund 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 Gateway Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Small/medium and Gateway Fund.

Diversification Opportunities for Pace Small/medium and Gateway Fund

0.9

Correlation Coefficient

Pace Small/medium  Gateway Fund

Almost no diversification

The 3 months correlation between Pace and Gateway is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Growth and Gateway Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Fund Class 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 Growth are associated (or correlated) with Gateway Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Fund Class has no effect on the direction of Pace Small/medium i.e., Pace Small/medium and Gateway Fund go up and down completely randomly.

Pair Corralation between Pace Small/medium and Gateway Fund

Assuming the 90 days horizon Pace Smallmedium Growth is expected to under-perform the Gateway Fund. In addition to that, Pace Small/medium is 1.96 times more volatile than Gateway Fund Class. It trades about -0.14 of its total potential returns per unit of risk. Gateway Fund Class is currently generating about -0.08 per unit of volatility. If you would invest  4,687  in Gateway Fund Class on December 21, 2024 and sell it today you would lose (150.00) from holding Gateway Fund Class or give up 3.2% of portfolio value over 90 days.

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

Pace Smallmedium Growth  vs.  Gateway Fund Class

Pace Smallmedium Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace Smallmedium Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Gateway Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gateway Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gateway Fund 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 Gateway Fund

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

The idea behind Pace Smallmedium Growth and Gateway Fund Class 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.